Four Banks Fail, Bringing 2009 Tally to 81

WASHINGTON ( TheStreet) -- Regulators shut down two banks and two thrifts Friday, bringing the total number of failed U.S. banks and savings and loans during 2009 to 81.

The Office of Thrift Supervision took over ebank of Atlanta and appointed the FDIC receiver. The FDIC then sold the thrift's deposits and sole office to Stearns Bank NA.

Georgia regulators shut down First Coweta Bank of Newnan, Ga. The Federal Deposit Insurance Corp. was appointed receiver and sold the failed bank's retail deposits and branches to United Bank of Zebulon, Ga.

The Alabama State Banking Department closed CapitalSouth Bank of Birmingham, Ala. and appointed the FDIC receiver. The FDIC sold all of CapitalSouth's retail deposits and branches to IBERIABANK of Lafayette, La. IBERIABANK is the main subsidiary of IBERIABANK Corp. ( IBKC).

Lastly, the Office of Thrift Supervision shuttered Guaranty Bank of Austin, Texas, the main subsidiary of Guaranty Financial Group ( GFG). In a deal that was leaked Thursday, the FDIC sold all of the bank's retail deposits and branches to BBVA Compass of Birmingham, Ala., the main U.S. subsidiary of Banco Bilbao Vizcaya Argentaria SA ( BB).

First Coweta and CapitalSouth were included in TheStreet.com's preliminary list of 104 undercapitalized banks and thrifts, based on preliminary second-quarter data. Guaranty Bank and ebank were not included in the preliminary second-quarter list, since data for most thrifts was unavailable when the report was published on Aug. 6.

Of the 89 institutions on a previous list published TheStreet.com in late May, 35 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 23 bank or thrift failures during 2008 and 2009, followed by Illinois with 14, California with 13, Florida with eight and Nevada with five.

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); Zions Bancorp ( ZION); PNC Financial ( PNC); and BB&T Corp ( BBT).

ebank

TheStreet.com Ratings had assigned ebank an E-minus (Very Weak) financial strength rating back in December 2007. The thrift had been losing money for several years, and rising nonperforming loans and loan losses through 2008 and the first half of 2009 wiped out its capital.

After a net loss of $2 million in the first quarter, the bank's Tier 1 leverage ratio dropped to 1.84%, and its total risk-based capital ratio was 3.79%, below the 8% required for most banks and thrifts to be considered adequately capitalized under regulatory capital guidelines .

The bank had $143 million in total assets and $130 million in deposits. In addition to the retail deposits, Stearns Bank purchased nearly all of the failed institution's assets, with the FDIC agreeing to share losses on $111 million.

Ebank's office was set to reopen Monday as a branch of Stearns Bank. The FDIC estimated the cost to its insurance fund would be $63 million.

First Coweta Bank

First Coweta Bank had been assigned an E-minus rating by TheStreet.com Ratings in July, a downgrade from an E rating the previous quarter.

First Coweta was organized in 2004. Like many of the recently failed banks in the Atlanta area, it was heavily concentrated in residential construction and commercial real estate lending. Asset quality slid steadily over the past year, and the institution was included on TheStreet.com's lists of undercapitalized banks for the past three quarters.

The bank had $167 million in total assets when it was shut down, and $155 million in deposits. In addition to all of the retail deposits, United Bank purchased $155 million in First Coweta's assets, with the FDIC agreeing to share in losses on $124 million.

United Bank chose not to acquired brokered deposits totaling $11 million, and the FDIC instructed Union Bank customers with CDs made through brokers to contact those brokers.

First Coweta's four branches were scheduled to reopen Saturday as branches of United Bank. The FDIC estimated the cost to its insurance fund would be $48 million.

CapitalSouth Bank

TheStreet.com Ratings had assigned CapitalSouth Bank an E-minus financial strength rating in March, a downgrade from an E the previous quarter.

A second-quarter net loss of $32 million left CapitalSouth critically undercapitalized with a Tier 1 leverage ratio of just 1.01%. The net loss stemmed from charge-offs in the bank's construction, commercial and residential loan portfolios.

CapitalSouth Bank had total assets of $617 million and $546 million in deposits. In addition to the failed bank's retail deposits, IBERIABANK purchased $589 million in assets, with the FDIC agreeing to share in losses on $499 million.

CapitalSouth Bank's $3.6 million in brokered deposits were not acquired by IBERIABANK and, as usual, the FDIC was set to pay out these deposits directly to the brokers.

CapitalSouth's 10 branches were scheduled to reopen Monday as branches of IBERIABANK.

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

Guaranty Bank

Guaranty Bank was assigned an E- rating in July, which was a downgrade from an E+ that had original been assigned, based on March financial reports. The rating was downgraded after Guaranty Financial announced that the thrift's first-quarter financials were being restated, since the Office of Thrift Supervision had directed Guaranty to take $1.45 billion in additional asset writedowns.

The writedowns, mainly on private mortgage-backed securities (that is, those not guaranteed by a government-sponsored enterprise, such as Fannie Mae ( FNM) or Freddie Mac ( FRE)), left the thrift with a Tier 1 capital ratio of negative 7.11%, vs. the 7.30% that was originally reported for the previous quarter.

Guaranty Bank had approximately $13 billion in total assets, and $12 billion in deposits. In addition to the retail deposits, BBVA Compass acquired $12 billion in assets from the failed thrift, with the FDIC retaining the rest for later disposition. The FDIC agreed to share in losses on $11 billion in assets acquired by BBVA Compass.

Guaranty Bank's brokered deposits totaled $344 million and were not acquired by BBVA. As usual, the FDIC announced that brokers would be paid directly and instructed customers with brokered CD deposits to contact these brokers.

The FDIC estimated the cost to its insurance fund from Guaranty's failure would be $3 billion, making it one of the more costly failures in the 2008-2009 crisis. The most costly failure was IndyMac Bank, which cost the FDIC $10.7 billion.

Free Financial Strength Ratings

Guaranty Bank reported $1.6 billion in uninsured deposits as of June 30, and with published reports saying that there were only three serious bidders for the failed thrift, it's clear that major risks remain for some depositors. There have been seven failed institutions 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 three of the institutions that failed Friday 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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