Regulators Shut Down Four Banks, Thrift

WASHINGTON ( TheStreet) -- Regulators shut down four banks and one savings and loan association Friday, bringing the total number of failed banks and thrifts during 2009 to 77.

State regulators closed Colonial Bank of Montgomery, Ala., a subsidiary of Colonial BancGroup ( CNB). As receiver, the Federal Deposit Insurance Corp. sold all of Colonial Bank's branches and deposits to BB&T ( BBT).

With $25 billion in total assets, Colonial is the fifth-largest bank to fail in U.S. history. Please see this earlier report on TheStreet.com for extensive coverage of Colonial's failure.

Elsewhere, the Office of Thrift Supervision took over Dwelling House Savings and Loan Association of Pittsburgh and appointed the FDIC receiver. The FDIC then sold the thrift's deposits and office to PNC Bank, a unit of PNC Financial Services ( PNC).

Please see this earlier report for more on Dwelling House's closing.

The Office of the Comptroller of the Currency shut down Union Bank of Gilbert, Ariz. The FDIC was appointed receiver and sold the failed bank's retail deposits and branches to MidFirst Bank of Oklahoma City.

The Arizona Department of Financial Institutions shuttered Community Bank of Arizona of Phoenix and appointed the FDIC receiver. The FDIC made another deal with MidFirst Bank, which took over all of Community Bank of Arizona's deposits and branches.

Lastly, state regulators closed Community Bank of Nevada of Las Vegas. Because the FDIC was unable to find another institution to buy the failed bank's deposits, the FDIC created the Deposit Insurance National Bank of Las Vegas, which will operate for about 30 days, allowing depositors to move their insured deposits to other institutions. The FDIC estimated that there were $4.2 million in uninsured deposits.

Both Community Bank of Arizona and Community Bank of Nevada were subsidiaries of Community Bancorp ( CBON) of Las Vegas.

Community Bank of Nevada was included in TheStreet.com's preliminary list of 104 undercapitalized banks and thrifts, based on preliminary second-quarter data.

Of the 89 institutions on a previous list published TheStreet.com in late May, 33 have failed.

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 21 bank or thrift failures during 2008 and 2009, followed by Illinois with 14, California with 13, Florida with eight and Nevada with five.

In addition to PNC Financial and BB&T, 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); and Zions Bancorp ( ZION).

Union Bank

TheStreet.com Ratings had assigned Union Bank an E-minus (Very Weak) financial strength rating based on its first-quarter financial report. The rating was a downgrade from an E the previous quarter. The bank's assets were heavily concentrated in construction loans and commercial real estate loans. Nonperforming assets, including repossessed real estate and loans 90 days past due or in nonaccrual status, made up 35% of total assets as of June 30.

Union Bank was not included in TheStreet.com's preliminary list of undercapitalized banks and thrifts as of June 30, because its second quarter capital ratios weren't available when the report was published.

After a net loss of $2.1 million in the first quarter, the bank's Tier 1 leverage ratio dropped to 4.7%, and its total risk-based capital ratio was 6.19%, below the 8% required for most banks and thrifts to be considered adequately capitalized under regulatory capital guidelines . According to Union Bank's second-quarter report, its Tier 1 capital was zero as of June 30.

Union Bank had $124 million in total assets and $112 million in deposits. In addition to the retail deposits, MidFirst Bank purchase about $11 million in assets from the failed institution, with the FDIC retaining the rest for later disposition.

Brokered deposits totaled $88 million, and the FDIC instructed Union Bank customers with CDs made through brokers to contact those brokers.

Union Bank's one office was set to reopen Monday as a branch of MidFirst Bank. The FDIC estimated the cost to its insurance fund would be $61 million.

Community Bank of Arizona

Community Bank of Arizona had been assigned an E-plus rating by TheStreet.com Ratings based on its first-quarter financial report. That was a downgrade from a D (Weak) rating the previous quarter.

Community Bank of Arizona had total assets of $159 million when it was shut down and was much smaller than its more-troubled sister institution, Community Bank of Nevada, which had $1.5 billion in total assets. Because the two banks were subsidiaries of the same holding company, and because Community Bank of Nevada was undercapitalized, the holding company couldn't offer any support to Community Bank of Arizona, according to a statement by the Arizona Department of Financial institutions.

Community Bank of Arizona's nonperforming assets ratio was 18.96% as of June 30.

MidFirst Bank acquired all of Community Bank of Arizona's deposits and branches, along with roughly $126 million in assets. The FDIC agreed to share in losses on $55 million of the acquired assets.

The failed bank's four branches were scheduled to reopen Monday as branches of MidFirst Bank. The FDIC estimated the cost to its insurance fund would be $25.5 million.

Community Bank of Nevada

TheStreet.com Ratings had assigned Community Bank of Nevada an E-minus financial strength rating based on its first-quarter financials, a downgrade from a D-minus the previous quarter.

Roughly 70% of Community Bank of Nevada's balance sheet was concentrated in construction loans and commercial real estate loans. Loan quality sank rapidly through 2008 and the first half of 2009, and nonperforming assets made up 28% of total assets as of June 30.

With net losses totaling $84 million during the first half of 2009 (mainly from reserve provisions to cover loan charge-offs), following net losses of $152 million for 2008, Community Bank of Nevada was insolvent as of June 30, with a Tier 1 leverage ratio of just 0.02%.

Not only was the holding company, Community Bancorp of Las Vegas, unable to raise additional capital to forestall its failure, the FDIC was unable to find a buyer for the institution's $1.4 billion in deposits. This may have been because the failed bank had $508 million in brokered deposits, which usually pay much higher rates than other deposits, as of June 30.

The FDIC receivership formed Deposit Insurance National Bank of Las Vegas to allow customers to withdraw their deposits over the next 30 days, except for brokered deposits, which were to be paid directly to the brokers and certificates of deposit and individual retirement accounts. The FDIC was to send checks directly to customers with insured deposits in CDs and IRA accounts.

Uninsured deposits were estimated to be $4.2 million, an amount FDIC representative David Barr said might be revised. Customers with uninsured deposits in a failed bank or thrift that are not acquired by another institution often receive dividends on their uninsured balances during the months following a failure. Dividends paid out at the time an institution is shut down are called "advance dividends." None were announced Friday.

The FDIC estimated the failure of Community Bank of Las Vegas would cost its insurance fund $781.5 million.

Free Financial Strength Ratings

Community Bank of Nevada was the sixth failed institution this year for which the FDIC was unable to find another institution to acquire deposits. Depositors with total balances exceeding FDIC insurance limits have lost money in five of those failures.

While the FDIC's temporary increase of the basic individual deposit insurance limit to $250,000 has been extended through 2013, the agency has not yet decided whether to extend the waiver on deposit insurance for non-interest-bearing business checking accounts. This means that at the end of the year, businesses and municipalities might have to take a more active approach in monitoring the health of the institutions holding their deposits.

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.

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 that are locked in can be lost when an institution fails. Depositors of Union Bank and Community Bank of Las Vegas face this inconvenience.

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.

TheStreet.com Ratings also provides award-winning stock ratings, which are available on the Stock Ratings Screener.

TheStreet.com Ratings was recently ranked the No. 1 independent stock selector during the market meltdown by BNY ConvergEx Group's BNY Jaywalk.

-- Written by Philip van Doorn in Jupiter Fla.

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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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