State and federal regulators Friday closed three failing banks and one savings and loan, bringing the total number of failed U.S. banking institutions during 2009 to 29. The Federal Deposit Insurance Corp. estimated the combined cost to its insurance fund from the four bank and thrift failures was $698 million. Please see TheStreet.com's Bank Failure Map for an interactive summary of all previous bank and thrift failures during 2008 and 2009. The Georgia Department of Banking and Finance took over American Southern Bank of Kennesaw, Ga. and appointed the FDIC receiver. The FDIC arranged for Bank of North Georgia to assume all of the failed bank's retail deposits. Bank of North Georgia is a subsidiary of Synovus Financial Corp. ( SNV). The Office of Thrift Supervision closed First Bank of Idaho of Ketchum, Idaho. The FDIC was appointed receiver and sold the failed thrift's retail deposits to U.S. Bank (held by U.S. Bancorp ( USB)). Next, the California Department of Financial Institutions took over First Bank of Beverly Hills of Calabasas, Calif. and placed it in FDIC receivership. With no buyer lined up for the failed bank, the FDIC made arrangements for a payout of all insured deposits. Lastly, the Michigan Office of Financial and Insurance Regulation shuttered Michigan Heritage Bank of Farmington Hills, Mich. The FDIC was appointed receiver, and sold all of Michigan Heritage Bank's retail deposits to Level One Bank, also headquartered in Farmington Hills. Michigan Heritage Bank was a subsidiary of Michigan Heritage Bancorp ( MHBC).
In its press release announcing the closing of First Bank of Idaho, the OTS said the thrift "was in unsound condition and unable to continue operating due to severe liquidity strains, deteriorating asset quality, negative earnings and declining capital." TheStreet.com Ratings had assigned First Bank of Idaho a D-minus (Weak) financial strength rating in March, downgrading the institution from D-plus, which was assigned in December. The institution was still considered well capitalized per ordinary regulatory capital guidelines as of Dec. 31, and its net loss of $2.7 million for 2008 was relatively small for a thrift of its size. The FDIC sold all of First Bank of Idaho's retail deposits to U.S. Bank for a small premium, and the failed institution's seven offices were scheduled to reopen as U.S. Bank branches Monday. Once again, brokered deposits were not acquired. These totaled about $113 million and were to be paid directly to the brokers. U.S. Bank only took on $18 million of First Bank of Idaho's assets, with the FDIC retaining the rest and estimating the cost to its insurance fund to be $191.2 million. This marks the third failed institution with deposits and branches acquired by U.S. Bancorp. Other large bank holding companies making similar acquisitions of failed banks or thrifts during 2008 and 2009 have included Zions Bancorp ( ZION), SunTrust Banks ( STI) and Regions Financial ( RF).
In a press release announcing its takeover of the institution, the California Department of Financial Institutions said it had been "closely monitoring the bank and had ordered it to increase its capital reserves to a safe and sound level. But efforts by the bank to do so were unsuccessful." TheStreet.com Ratings had assigned First Bank of Beverly Hills an E-minus (Very Weak) financial strength rating in March, a downgrade from the D (Weak) rating that was assigned in September. The bank was included in TheStreet.com's list of undercapitalized banks and thrifts since a fourth-quarter net loss of $83 million left it with tier 1-leverage and total risk-based capital ratios of 3.37% and 6.45%, respectively. These ratios need to be at least 5% and 10%, respectively, for a bank to be considered well capitalized under ordinary circumstances. Most of the net losses sprang from charge-offs of nonperforming residential and commercial construction loans. Since the agency didn't line up a buyer for the failed institution, the FDIC arranged to pay out all of the its deposits. Checks were to be mailed to retail depositors Monday, except for an estimated $179,000 in uninsured deposits. Brokered deposits were to be directly to the brokers. The FDIC estimated the cost to its insurance fund would be $394 million.
TheStreet.com Ratings had assigned Michigan Heritage Bank an E-minus (Very Weak) financial strength rating in December, a downgrade from an E rating assigned in September. The institution's capital was wiped out because of loan charge-offs across its diversified portfolio. The FDIC sold Michigan Heritage's retail deposits to Level One Bank, and the failed bank's three offices were set to reopen as Level One branches on Monday. Once again, brokered deposits were not acquired, and were to be paid directly to brokers. Level One Bank took on $46 million of the failed bank's assets, with the FDIC retaining the rest for later disposition. The agency estimated the cost to its insurance fund would be $71.3 million.
The FDIC has temporarily increased the basic individual deposit insurance limit to $250,000 on non-retirement balances and has waived insurance limits on non-interest-bearing checking accounts, but the waiver is set to expire at the end of the year, with most other balances reverting to their usual $100,000 limit. 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 of 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. 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.