2011 Bank Failure Winners

NEW YORK ( TheStreet) -- While the pace of bank failures slowed during 2011, there remains a bountiful supply of troubled institutions heading toward oblivion, which means continued opportunities for acquirers and their investors to see major gains.

During 2011, there have been "only" 92 bank failures, but 2012 should be another banner year for the Federal Deposit Insurance Corp., since there were over 150 institutions on TheStreet's third-quarter Bank Watch List of undercapitalized institutions.

The largest bank or thrift to fail during 2011 was Superior Bank of Birmingham, Ala., which had $3 billion in total assets when it was shuttered by the Office of Thrift Supervision in April. The failed thrift was taken over by the newly chartered Superior Bank, NA, which is a subsidiary of the privately held Community Bancorp LLC of Houston, Texas.

The second-largest 2011 failure with $2.3 billion in total assets was First Community Bank of Taos, N.M., which was shuttered by state regulators in January and sold by the FDIC to U.S. Bancorp ( USB). While this was a relatively small deal for U.S. Bancorp, the acquirer reported a tidy $46 million gain on the government-assisted purchase.

Georgia leads the way

After falling into second place in 2010, Georgia once again took the lead among all states with 23 bank failures in 2011, followed by 13 for Florida and nine failures in Illinois.

Georgia's banks continue to pay the price for the exuberant pop in the housing market in the Atlanta suburbs leading into 2007, during which a slew of new banks were organized. SNL Financial reported that in 2011, four of the failed Georgia banks were five years old, or even younger.

The largest Georgia bank to fail during 2011 was The Park Avenue Bank, which had $953 million in total assets when it was shuttered by state regulators in April. The bank was then sold by the Federal Deposit Insurance Corp. (FDIC) to Bank of the Ozarks ( OZRK) of Little Rock, Ark.,

How failures benefit investors

In the weeks (or months) leading up to a bank failure, the FDIC peddles the failing institution to stronger local competitors or out-of-market players looking to expand. The FDIC will often agree to cover 80% of losses on a significant portion of a failed bank's assets acquired by the winning bidder. In some failed-bank deals, the winning bidder cherry-picks desired assets, leaving the bitter dregs for the FDIC to resolve later.

The winning bidder often books significant gains on bargain purchases during the quarters following a failed bank acquisition.

Bank of the Ozarks purchased three failed banks during 2011, following four government-assisted acquisitions during the previous year. During the first three quarters of 2011, the bank booked $65.7 million in gains from FDIC purchases, following $26.3 million in gains during 2010.

Not a bad haul for a bank that had $3.9 billion in total assets as of Sept. 30.

More importantly for investors, the shares were up 44% year-to-date, through Thursday's market close at $30.68, which is amazing performance in a year that has seen the KBW Bank Index ( I:BKX) drop 24%.

Not surprisingly after such a run-up, and with the shares trading for 2.7 times tangible book value according to SNL Financial and 16 times the consensus 2012 earnings estimate of $1.90, among analysts polled by FactSet, most analysts have neutral ratings for Bank of the Ozarks.

Sterne Agee analyst Peyton Green has a neutral rating on Bank of the Ozarks, with a $32 price target, saying last week that the company's "conservative purchase accounting assumptions" will lead to higher-than-expected fourth-quarter earnings, resulting in "upward 2012E-2013E EPS revisions" among analysts.

Interested in more on Bank of the Ozarks? See TheStreet Ratings' report card for this stock.

Another winner in the bank bidding wars of 2011 has been Wintrust Financial ( WTFC), of Lake Forest, Ill, which took over three failed banks during the year, following three government-assisted acquisitions in 2010. The bank was included among TheStreet's 5 Chicago Bank Picks in late 2010, which we revisited on Thursday.

The company reported $38.0 million in bargain purchase gains from its FDIC-assisted acquisitions during the first three quarters of 2011, following gains of $43.0 million in 2010.

While Wintrust's were down 12% through Thursday's close at $28.66 -- again ,beating the overall performance of the banking industry -- FIG Partners analyst John Rodis says the company " has started to get more aggressive in its commercial lending effort helping to drive core loan growth," which will "help grow franchise value over the next few years."

Rodis has an "Outperform" rating on Wintrust, with a $33 price target.

Interested in more on Wintrust? See TheStreet Ratings' report card for this stock.

Another active acquirer of failed banks has been SCBT Financial ( SCBT) of Columbia, S.C., which purchased the failed Habersham Bank of Clarkesville, Ga., in February and BankMeridian, NA, of Columbia, S.C., in July, following .

The company previously acquired the failed Community Bank & Trust of Cornelia, Ga., in January of 2010, which had $1.2 billion in total assets when it was closed by state regulators.

SCBT booked $16.5 million in bargain purchase gains during the first three quarters of 2011, following a whopping $98.1 million in gains during 2010.

The shares were down 8% year-to-date through Thursday's close at $29.32.

SCBT had total assets of $3.9 billion as of Sept. 30. On Dec. 20, the company switched gears, announcing a traditional deal to acquire Peoples Bancorporation ( PBCE) of Easley, S.C., in an exchange of shares valued at $28.4 million. Peoples Bancorporation had $546 million in total assets as of Sept. 30.

Sterne Agee analyst Kenneth James calls SCBT's latest acquisition "an attractive traditional deal," that "illustrates the company's longer-term opportunity to build meaningful franchise in SC/GA via M&A."

James also said the deal has a "clear strategic rationale," since it fills-in and expands SCBT's market area and is so attractively priced at 62% of the target company's tangible book value.

James still has a neutral rating on SCBT, since the shares "were already trading at a healthy valuation with some M&A growth likely baked into forward expectations," although the analyst also said "we expect the shares could see upside to ~$30 in the short run."

Interested in more on SCBT Financial? See TheStreet Ratings' report card for this stock.

First Citizens Bancshares ( FCNCA) of Raleigh, N.C., acquired United Western Bank of Denver, which had $2.1 billion in assets when it failed in January, and also Colorado Capital Bank of Castle Rock, which had $718 million in assets when it was closed by state regulators in July.

First Citizens booked $151 million in bargain purchase gains during the first three quarters of 2011, following gains from FDIC acquisitions of 136 million in 2010.

The shares were down 6% year-to-date through Thursday's close at $177.09.

The shares trade for just over tangible book value, according to SNL, and for 12 times the consensus 2012 earnings estimate of $14.97 a share, among analysts polled by FactSet.

Interested in more on First Citizens Bancshares? See TheStreet Ratings' report card for this stock.

Thorough Bank Failure Coverage

All 414 previous bank and thrift closures since the beginning of 2008 are detailed in TheStreet's interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2011 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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.