Regulators closed seven Friday, bringing the total number of failed U.S. banks and savings and loan associations during 2009 to 64. Four of the failed banks were included in TheStreet.com's recent list of 89 undercapitalized banks and thrifts. Twenty-two of the undercapitalized institutions listed on May 28 have failed so far. The New York State Banking Department took over Waterford Village Bank of Clarence, N.Y. and appointed the Federal Deposit Insurance Corp. receiver. The FDIC sold all of the failed bank's deposits and branches to Evans Bank of Angola, N.Y., a subsidiary of Evans Bancorp ( EVBN).
The Georgia Department of Banking and Finance then closed the six banks held by Security Bank Corp ( SBKC) of Macon, Ga. The FDIC was appointed receiver and sold the deposits and branches of all six failed banks to State Bank and Trust Co. of Pinehurst, Ga. All previous bank failures since the beginning of 2008 are detailed on TheStreet.com's interactive Bank Failure Map. Georgia continues to lead all states with 22 bank or thrift failures during 2008 and 2009, followed by California and Illinois with 13 each, and then 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-ever bank or thrift to fail in the U.S.; SunTrust Banks ( STI); Regions Financial ( RF); Fifth Third Bancorp ( FITB); U.S. Bancorp ( USB); BB&T Corp ( BBT); and Zions Bancorporation ( ZION).
In its press release announcing Waterford Village's failure, the New York State Banking Department said "We determined that the management team's inability to adequately and timely address problems outlined in a Feb. 12 Cease and Desist Order led to the bank being critically undercapitalized." Waterford Village Bank was organized in Feb. 2007 and was locally owned, with its initial capital raised via a stock subscription for local investors that raised $10 million. Unlike most bank failures during the 2008 and 2009 crisis, Waterford Village Bank's downfall didn't stem from credit quality problems. The bank's expenses were simply too high for it to generate a profit in time to avoid running out of capital as it rapidly expanded. In June, the bank's board of directors sent an application to New York regulators requesting approval of an agreement for the bank to be acquired for $9 million by an investor group led by Jason Aintabi. According to several published reports, Waterford Village Bank's founding CEO, Kathleen Kiesel Flemming, and several other investors challenged the deal, saying they would only receive about 29 cents a share, when the original subscription share price was $10.00. Flemming had been dismissed by the institution's board of directors in August 2008. According to a report in The Buffalo News, a letter sent by Ms. Flemming's attorney to New York Superintendent of Banks Richard Neiman said "Since Ms. Flemming's employment was terminated, the bank has fallen into a death spiral under the current Board of Directors and officers." This is a questionable assertion, considering that the bank reported being undercapitalized the month following Ms. Neiman's ouster. Waterford Village Bank had $62 million in total assets and $58 million in deposits. Its office was set to reopen as a branch of Evans Bank. The FDIC entered into a loss sharing agreement with Evans Bank to cover losses on $56 million of the acquired assets, and estimated the cost to its insurance fund would be $5.6 million.