Three More Banks Fail

WASHINGTON ( TheStreet) -- State regulators closed banks in Michigan, Minnesota and Colorado Friday, bringing the total number of failed banks and thrifts this year to 98.

The Michigan Office of Financial and Insurance Regulation shuttered Warren Bank of Warren, Mich. and appointed the Federal Deposit Insurance Corporation receiver. The FDIC then sold the failed institution's branches and deposits to Huntington National Bank, the main subsidiary of Huntington Bancshares ( HBAN).

Minnesota regulators took over Jennings State Bank of Spring Grove. The FDIC was appointed receiver and sold the the failed bank's deposits and nearly all of its assets to Central Bank of Stillwater, Minn.

Later on Friday the Office of the Comptroller of the Currency shut down Southern Colorado National Bank of Pueblo and appointed the FDIC receiver. The FDIC sold the failed bank's deposits and almost all of its assets to Legacy Bank of Wiley, Colo.

All three failed banks had been assigned E-minus (Very Weak) financial strength ratings by TheStreet.com Ratings.

The three failed institutions were also included in TheStreet.com's list of undercapitalized banks and thrifts, based on second-quarter data.

They were also among 89 institutions on a previous list published by TheStreet.com in late May. Out of that list, 45 banks and thrifts have failed.

Warren Bank

Warren Bank had been considered undercapitalized since the end of 2008, when it reported a tier 1 leverage ratio of 4.75% and a total risk-based capital ratio of 7.44%. These ratios need to be at least 4% and 8% for most banks to be considered well-capitialized under regulatory capital guidelines. They need to be 5% and 10% for most institutions to be considered well-capitalized.

Like so many of the banks to fail during 2008 and 2009, Warren Bank failed because losses from soured construction and land-development loans depleted its capital. Net losses for 2008 totaled $19.8 million and the bank lost another $23 million during the first half of 2009.

Warren Bank had $538 million in total assets and $501 million in deposits. Its six branches were set to reopen Saturday as branches of Huntington National Bank. In addition to the deposits, Huntington acquired $83 million of the failed bank's assets, with the FDIC retaining the rest for later disposition. The agency estimated the cost to its insurance fund would be $275 million. This was one of the mostly costly failures in the current cycle, based on percentage of total assets, and reflected the bank's high concentration in construction and development loans, as well as commercial real estate loans.

Jennings State Bank

Jennings State Bank had been undercapitalized for over a year, with its total risk-based capital ratio slipping to 7.66% in September 2008. By June 30, 2009, commercial and other real estate loan losses had pushed the bank's tier 1 leverage ratio down to just 0.83% and its total risk-based capital ratio to 2.22%.

Jennings State Bank was a small institution with two branches and total assets of $56 million and $52 million in deposits. Its branches were scheduled to reopen Saturday as branches of Central Bank.

The FDIC entered into a loss-sharing agreement with Central Bank, with the agency agreeing to share losses on roughly $38 million of the acquired assets. The FDIC estimated the cost to its insurance fund would be $11.7 million.

Southern Colorado National Bank

Southern Colorado National was also a small institution, with two branches, about $40 million in total assets and $32 million in deposits. The institution had been undercapitalized since March, after a first quarter loss of $1.2 million left it with a tier 1 leverage ratio of 3.35% and a total risk-based capital ratio of $6.93%.

With the bank unable to raise additional capital and suffering a second quarter loss of $322 thousand, the ratios had dropped to 3.17% and 5.52%. Following the familiar pattern, construction and commercial real estate loan charge-offs caused most of the losses.

Once again the FDIC entered into a loss-sharing agreement with the acquiring institution. The agency agreed to share in losses on approximately $26 million of the assets acquired by Legacy Bank.

Southern Colorado's two offices were to reopen Saturday as Legacy Bank branches. The FDIC estimated the cost to its insurance fund would be $6.6 million.

Ongoing Bank Failure Coverage

All failures for 2008 and 2009 through last week are detailed in TheStreet.com's interactive bank failure map.

Georgia leads all states with 24 bank or thrift failures during 2008 and 2009, followed by Illinois with 17, California with 14, Florida with eight and Nevada with five failures.

J.P. Morgan Chase ( JPM), which acquired Washington Mutual, the largest-ever bank or thrift to fail in the U.S., is among the large bank holding companies that have acquired failed institutions during 2008 and 2009. Others include SunTrust Banks ( STI); Regions Financial ( RF); Fifth Third Bancorp ( FITB); U.S. Bancorp ( USB); Zions Bancorp ( ZION); PNC Financial ( PNC); and BB&T ( BBT).

Free Financial Strength Ratings

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.

-- Reported by Philip van Doorn in Jupiter Fla.

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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