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'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'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).

Waterford Village Bank Ratings had assigned Waterford Village Bank an E-minus (Very Weak) financial strength rating in March, which was a downgrade from an E the previous quarter. The institution was undercapitalized under regulatory capital guidelines since the end of the third quarter of 2008.

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.

Security Bank Corp

The six subsidiaries of Security Bank Corp had 20 branches, with assets totaling $2.8 billion and total deposits of $2.4 billion. Ratings had assigned all six banks financial strength ratings of E-minus, except for Security Bank of Jones County of Gray, Ga., which was rated an E-plus.

The other five failed Georgia institutions held by Security Bank Corp were Security Bank of Bibb County of Macon, Security Bank of Houston County of Perry, Ga., Security Bank of Gwinnett County of Suwanee, Ga., Security Bank of North Metro of Woodstock, Ga. and Security Bank of North Fulton of Alpharetta, Ga.

The consolidated holding company's capital was overwhelmed by losses from nonperforming residential and commercial construction loans, with net loan charge-offs from losses of $100 million in 2008, followed by another $18 million during the first quarter. Five of the six bank subsidiaries had been operating under regulatory cease-and-desist orders requiring additional capital.

All of the failed banks' branches were scheduled to reopen during normal business hours on Saturday as branches of State Bank and Trust.

In addition to the deposits and branches, State Bank and Trust acquired $2.4 billion in assets, with the FDIC agreeing to share in losses on approximately $1.7 billion of the acquired assets. The FDIC held the remaining assets for later disposition, and announced that State Bank and Trust had "received a $300 million capital infusion from a group of 26 investors, led by Joseph Evans."

The agency estimated the combined cost to its insurance fund from the six failures would be $807 million.

Free Financial Strength Ratings

Although depositors suffered no losses in the seven bank failures on Friday, there have been five instances this year when a bank failed and the FDIC was unable to find another institution to acquire its deposits. Depositors with total balances exceeding FDIC insurance limits lost money in four of those failures.

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.

For depositors shopping for high-rate CDs through brokers, it is also important to consider the health of a bank or thrift, since attractive CD rates can be lost when an institution fails. 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. P/> Ratings also provides award-winning stock ratings, which are available on the Stock Ratings Screener. Ratings was recently ranked the No. 1 independent stock selector during the market meltdown by BNY ConvergEx Group's BNY Jaywalk.

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Philip W. van Doorn joined 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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