Regulators shuttered two Illinois banks Friday, bringing the total number of failed U.S. banks and thrifts during 2009 to 36. The Illinois Department of Financial and Professional Regulation seized Strategic Capital Bank of Champaign, Ill. The Federal Deposit Insurance Corp. was appointed receiver and arranged for all of the failed bank's deposits to be taken over by Midland States Bank of Effingham, Ill. The Office of the Comptroller of the Currency then shut down Citizens National Bank of Macomb, Ill. and appointed the FDIC receiver. The FDIC then arranged for Morton Community Bank of Morton, Ill. to assume Citizens' retail deposits.
The two bank closings come on the heels of Thursday's failure of BankUnited FSB. Please see TheStreet.com's follow-up coverage of the BankUnited failure, which includes the Bank Failure Map -- an interactive summary of all previous bank and thrift failures during 2008 and 2009. Both of the Illinois banks that failed Friday were included in TheStreet.com's preliminary list of undercapitalized banks as of March 31. According to preliminary first-quarter regulatory data provided by SNL Financial, 17 Illinois banks were undercapitalized under regulatory guidelines as of March 31. While Illinois led the list with the most undercapitalized banks for any state, it is important to point out that Illinois also has more banks than any other state, with 658 as of Dec. 31. Illinois was one of the last states to remove legal barriers against out-of-state banks doing business within its borders, which is one of the reasons it is not as far along on the road to consolidation as many other states.
The Friday failures brought the number of failed Illinois institutions this year to five. Georgia leads all states, with 11 bank or thrift failures during 2008 and 2009, followed by California, with nine failures; Illinois, with six; Florida, with five; and Nevada, with four. Large bank holding companies that have acquired failed institutions during 2008 and 2009 include J.P. Morgan Chase ( JPM), which acquired Washington Mutual, the largest bank or thrift ever to fail in the U.S., SunTrust Banks ( STI), Regions Financial ( RF), Zions Bancorp ( ZION), Fifth Third Bancorp ( FITB), U.S. Bancorp ( USB) and BB&T Corp ( BBT).
Strategic Capital BankStrategic Capital Bank had total assets of $537 million and total deposits of $471 million. Midland State Bank entered into a loss-sharing agreement with the FDIC, with Midland acquiring all of the failed institution's deposits and $536 million of its assets. The FDIC agreed to share in losses on $420 million in assets. Strategic Capital's office is to reopen Tuesday as a branch of Midland State Bank. TheStreet.com ratings had assigned Strategic Capital an E-minus (Very Weak) financial strength rating in March, based on Dec. 31 financial information. The rating was a downgrade from the E rating that was assigned in September. According to preliminary data supplied by SNL Financial, Strategic Capital Bank was undercapitalized under regulatory guidelines, with a Tier 1 leverage ratio of 3.62% and a total risk-based capital ratio of 6.01%. These ratios need to be at least 5% and 10%, respectively, for a bank or thrift to be considered well-capitalized, unless an institution has received a regulatory order to maintain higher levels of capital.
Although Strategic Capital reported first-quarter net income of $1.6 million, this was mainly the result of a transfer of $1.5 million from loan-loss reserves. The bank's net losses for 2008 totaled $11.1 million, as losses on securities and charge-offs in its commercial and construction loan portfolios ate into its capital. The FDIC estimates that the cost to its deposit insurance fund from Strategic Capital's failure will be $173 million.
Citizens National Bank of MacombCitizens National Bank of Macomb had total assets of $437 million and total deposits of about $400 million. The FDIC came to an agreement with Morton Community Bank under which Morton is acquiring all of the failed bank's retail deposits and purchasing $240 of its assets. The FDIC agreed to share losses on $200 million of the assets. Morton Community chose not to acquire roughly $200 million in brokered deposits. The FDIC will pay brokers directly. In its press release announcing the failure of Citizens National, the OCC cited "unsafe and unsound practices" and said there was "no reasonable prospect" for the bank to become well-capitalized without federal assistance. Citizens National Bank was considered significantly undercapitalized, with a Tier 1 leverage ratio of 2.21% and a total risk-based capital ratio of 4.55% as of March 31, according to preliminary data supplied by SNL Financial. TheStreet.com Ratings had assigned the institution an E-minus (Very Weak) financial strength rating in March, based on Dec. 31 financial information. The rating was a downgrade from the E rating assigned in September.
Citizens National reported a first-quarter net loss of $4.3 million, following a 2008 net loss of $13.8 million, as the institution was overwhelmed by losses on securities investments and nonperforming commercial real estate loans. The FDIC estimated the cost to its insurance fund from Citizens National Bank's failure would be $106 million.