As we drive deeper into the second quarter of 2010, 57 banks have been closed throughout the United State during the calendar year by the Federal Deposit Insurance Corporation (FDIC) and the office of the comptroller of the currency. Assessing the US bank failure situation vis-à-vis 2009, considered the worst year for bank failures in decades, failures are almost twice that of 2009 – at this time in April 2009, 29 banks had shuttered their doors, Horizon Bank of Bellingham, WA was the 29th FDIC-insured institution to fail in 2009.

If we look at the hot spots of the situation, Illinois has the most failed banks in 2010, with a total of ten (10) institutions that have gone under this year alone. Florida is a close second with nine (9) bank failures in 2010. According to our research, bank failures have in significant part been due to construction and multifamily distressed assets.

Yesterday, the FDIC announced a torrent of bank closures in Illinois, which caused the state’s bank failure rate to spike to 10. The latest list of bank failures include Wheatland Bank, Peotone Bank and Trust Company, Lincoln Park Savings Bank, New Century Bank, Citizens Bank and Trust Company of Chicago, Broadway Bank, and Amcore Bank National Association. The FDIC is on pace to shatter the failed bank count of 140 set in 2009.

What do Boca Raton, FL, Normal, IL, Germantown, MD, and Ogden, UT have in common? They are home to the latest four banks to shutter their doors in 2010, bringing the total failed bank count this year to 26. With over 700 banks on the FDIC’s watch list, 2010 could prove to be the year of extreme bank failure across the US.

Sun American Bank, Boca Raton, Florida

The FDIC, in conjunction with the Florida Office of Financial Regulation, closed Sun American Bank on March 5, 2010. At the same time, First-Citizens Bank & Trust Company and the FDIC entered into a loss-share transaction on $433.0 million of Sun American Bank’s assets assuming all of the deposits of the failed bank.

Sun American Bank had approximately $535.7 million in total assets and $443.5 million in total deposits by December 31, 2009, and the 12 branches of Sun American Bank will be reopened as branches of First-Citizens Bank & Trust Company.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for this individual closure will be $103.8 million. Sun American Bank is the 23rd FDIC-insured institution to fail in the nation this year, and the fourth in Florida.

Distressed Pro’s BankProspector shows weak capital adequacy ratios at Sun American, $63 million in non-accrual distressed asset totals and over $10 million in OREO. The bulk of the institution’s distress was centered in commercial and construction loan asset types.

Bank of Illinois, Normal, Illinois

Recently, the Bank of Illinois was closed by the FDIC and the Illinois Department of Financial Professional Regulation – Division of Banking. This failure represents the third FDIC-insured banking institution to close in Illinois and the 24th to fail in the nation this year. Heartland Bank and Trust Company of Bloomington, Illinois has assumed all of the deposits of Bank of Illinois, approximately $211.7 million in total assets and $198.5 million in total deposits. The 2 branches of Bank of Illinois have reopened as branches of Heartland Bank and Trust Company.

Bank of Illinois was burdened by distress in their construction and residential loan portfolios, and was carrying OREO balances over $1 million in both multifamily and commercial asset types.

Waterfield Bank, Germantown, Maryland

Waterfield Bank of Germantown, MD is the first bank to fail in Maryland this year. Unique to Waterfield Bank is the fact that the failed institution had a solo branch location and namely took deposits from customers via the Internet and 38 affinity groups.

Waterfield Bank had $155.6 million in assets and $156.4 million in deposits by December 31, 2009. At the time of closing, the amount of deposits exceeding FDIC insurance limits totaled approximately $407,000. Depositors with more than $250,000 at Waterfield Bank should call the FDIC at (800) 830-4735 to make an appointment to discuss the status of their funds.

Waterfield Bank was troubled with negative capital adequacy ratios, and distress mainly in their construction and residential loan portfolios, where 23% and 16% was non-current respectively.

Centennial Bank, Ogden, Utah

Centennial Bank of Ogden, UT was closed on March 5, 2010 by the FDIC in conjunction with the Utah Department of Financial Institutions. Zions First National Bank of Salt Lake City accepted the failed bank’s direct deposits from the federal government

The FDIC was unable to find another financial institution to take over the banking operations of Centennial Bank and brokered deposits will be wired once brokers provide the FDIC with the necessary documents to determine if any of their clients exceed the insurance limits. Customers who placed money with brokers should contact them directly for more information about the status of their funds.

The failed bank is the 26th FDIC-insured institution to fail this year and the second in Utah. It had approximately $215.2 million in total assets and $205.1 million in total deposits by December 31, 2009 and approximately $1.8 million in uninsured funds by the time of closing.

The cost of the failure to its DIF is estimated to be $96.3 million. BankProspector shows that Centennial Bank was burdened with significant construction loan portfolio distress, capital adequacy ratios between 1% and 3%, and OREO balances over $35 million.

The search for US bank failures grew a little easier this past week when the Federal Deposit Insurance Corporation (FDIC) moved forward in closing an additional 4 institutions. The latest US FDIC-insured institutions to fail, which brings the 2010 failed bank count to 20, include:

• Marco Community Bank – its sole branch has been reopened as a branch of Mutual of Omaha Bank.
• La Coste National Bank – its sole branch will reopen on Monday as a branch of Community National Bank.
• George Washington Savings Bank – its 4 branches will reopen as branches of FirstMerit Bank, N.A.
• La Jolla Bank, FSB – its 10 branches have been reopened as branches of OneWest Bank, FSB.

Marco Community Bank of Marco Island, Florida

This is the 17th FDIC-insured institution to fail in the nation this year, and the third in Florida. Marco Community Bank had approximately $119.6 million in total assets and $117.1 million in total deposits by December 31, 2009. Mutual of Omaha Bank will pay the FDIC a premium of 1.5 percent to assume all of the deposits of Marco Community Bank.

The FDIC and Mutual of Omaha Bank are in the process of sorting out the loss-share transaction on $104.8 million of Marco Community Bank’s assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for this transaction will be $38.1 million.

By using BankProspector to look inside the distressed assets of this failed bank, we can see that Marco Community Bank carried leverage and adequacy ratios of 1% and 2% respectively, and had over $7 million in non-accrual and almost $4 million in OREO. The majority of Marco Community Bank’s issues rested in construction and residential loan types, with almost 30% of its construction portfolio noncurrent.

La Coste National Bank of La Coste, Texas

As the first Texas bank failure of 2010, and the 18th in the country, La Coste National Bank had approximately $53.9 million in total assets and $49.3 million in total deposits by December 31, 2009. Community National Bank will pay the FDIC a premium of 0.51 percent to assume all of its deposits.

The Federal Deposit Insurance Corporation estimates that the cost to the DIF on this bank failure will reach $3.7 million.

La Coste National Bank carried an 8% leverage ratio and capital adequacy ratios over 20%. The failure of this bank may not be real estate related. It appears they were heavy in securities as compared to the their cash and had very little cash on hand. With being only a $50 million bank, things could have gone south very fast with less than $5 million on hand in cash reserves.

George Washington Savings Bank of Orland Park, Illinois

This founding-father bank is the 19th FDIC-insured institution to fail in the nation this year, and the second in Illinois. George Washington Savings Bank had approximately $412.8 million in total assets and $395.3 million in total deposits by December 31,2009. FirstMerit Bank, N.A. will pay the FDIC a premium of 0.31 percent to assume all of the deposits of George Washington Savings Bank.

The FDIC and FirstMerit Bank, N.A. are finalizing the loss-share transaction on $324.2 million of George Washington Savings Bank’s assets, with approximately $141.4 million hitting the DIF.

BankProspector shows distressed asset non-accrual totals at George Washington Savings Bank at over $100 million, OREO levels approaching $20 million, and noncurrent portfolio levels at approximately 41%. While the institution held non-accrual balances across all four (4) loans types that we currently track, the majority of the bank’s distress was in construction and residential.

La Jolla Bank, FSB of La Jolla, California

Only the second bank failure in California in 2010, but the 20th in the nation, La Jolla Bank, FSB had approximately $3.6 billion in total assets and $2.8 billion in total deposits by December 31, 2009. The FDIC and OneWest Bank, FSB entered into a loss-share transaction on $3.31 billion of La Jolla Bank, FSB’s assets. OneWest Bank, FSB did not pay the FDIC a premium for the deposits of La Jolla Bank, FSB. The FDIC estimates that the cost to the DIF will be $882.3 million.

BankProspector allows us to peer below the surface of La Jolla Bank, FSB to determine that significant issues in the institution’s distressed construction loans and residential loan portfolio caused its downfall, where 50% and 16% of assets were noncurrent respectively. Leverage and capital adequacy ratios were all below 2%, and of the latest 4 US bank failures, La Jolla is by far the largest to go down with almost $750 million in distressed asset totals.

In the wake of another US bank failure in early February 2010, the two branches of 1st American State Bank of Hancock Minnesota have reopened as branches of Community Development Bank, FSB, under the watchful eye of the Federal Deposit Insurance Corporation (FDIC) and the Minnesota Department of Commerce. BankProspector provides Distressed Pro members with clear insight that failure was caused by a heavy distressed construction loan portfolio.

1st American State Bank of Minnesota had approximately $18.2 million in total assets and $16.3 million in total deposits. The FDIC and Community Development Bank, FSB of Ogema, MN entered into a loss-share transaction of $11.7 million to move the failed bank and its assets to Community Development Bank. Despite regulators shutting down 1st American, as we have seen with the previous 15 bank failures of 2010, the failed institution’s assets are being enveloped by another (FDIC-insured) institution, and customers are inconvenienced by the event, but are largely not impacted.

1st American State Bank of Minnesota shouldered heavy amounts of distressed construction loans across their portfolio, as well as commercial loans, to the point where 65% and 40% were noncurrent respectively. Nonaccrual levels of the same stood at approximately $636,000 and $776,000, with OREO levels of $407,000 and $283,000 across construction and commercial loan types.

1st American is the 16th FDIC-insured institution to fail in the nation this year, and the 3rd Minnesota bank failure. If you watch list bank failures, you know that MN now holds the highest 2010 single state number of failures across the country at 3. There were 140 banks that failed in 2009, the highest count since 1992, and with 15 FDIC-insured banks being shut down in January 2010 alone, the country is on pace to surpass the 2009 failure count – it should be noted however, the pace of bank failure has slowed in early February. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) of the 1st American closing will be approximately $3.1 million.

The First National Bank of Georgia, located in Carrolton, GA, which had approximately $832.6 million in total assets and $757.9 million in total deposits was closed in late January 2010 by the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC). Following the bank’s failure, depositors from its eleven branches became customers of Community & Southern Bank.

Community & Southern Bank paid the FDIC a 1.25 percent premium to assume all of the deposits of the failed Bank. The loss–share transaction between the FDIC and Community & Southern Bank is estimated to be worth approximately $607.4 million. The failure of First National Bank of Georgia represents the first bank failure in Georgia thus far in 2010. The cost to the Deposit Insurance Fund (DIF) is estimated at $260.4 million.

Distressed Pro’s BankProspector shows that First National Bank reported capital adequacy of 1% with nonaccrual real estate loans of $92 million, and an OREO balance of over $42 million. First National Bank of Georgia carried noncurrent distressed real estate loans at approximately 50% and 24% in their construction and multifamily loan portfolios respectively.

Florida Community Bank was the 11th FDIC-insured institution to fail in the nation this year, and the second in Florida. Florida Community Bank was closed by the State of Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) on Friday, January 29, 2010.

The 11 branches of Florida Community Bank reopened as branches of Premier American Bank, N.A., but under the name Florida Community Bank.

Premier American Bank, N.A. agreed to pay the FDIC a premium of 0.4 percent to assume the deposits of Florida Community Bank, which had approximately $875.5 million in total assets and $795.5 million in total deposits. The amount of the loss-share transaction between the FDIC and Premier American Bank, N.A., is pegged at approximately $305.4 million.

Florida Community Bank of Immokalee, Florida Fails

BankProspector shows that Florida Community Bank became heavily burdened by construction loans, to the point that more than 50% of their portfolio was noncurrent. OREO levels across construction and commercial loan types had past levels of $75 million.

It was recently announced that United Valley Bank will pay the Federal Deposit Insure Corporation (FDIC) a premium of 7.35% to assume all deposits of Marshall Bank, National Association after the Hallock, MN institution failed in late January.

United Valley Bank signed an agreement to purchase essentially all of the failed bank’s assets, and the 3 branches of Marshall Bank, N.A. will be opening as branches of United Valley Bank.

The institution carried capital adequacy and leverage ratios under 6%, however, Marshall Bank was hampered by construction lending, with approximately 58% of their portfolio noncurrent. The FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $4.1 million. Marshall Bank, National Association is the second institution in Minnesota to fail during 2010.

In late January, the Federal Deposit Insurance Corporation (FDIC), and California Department of Financial Institutions closed First Regional Bank of Los Angeles, CA. The 8 California branches of First Regional Bank will be transferred to First-Citizens Bank & Trust Company.

First Regional Bank, which recorded approximately $2.18 billion in total assets and $1.87 billion in total deposits by September 30, 2009. First-Citizens Bank & Trust Company agreed to purchase approximately $2.17 billion of First Regional Bank’s assets, while the FDIC retained the remaining assets for later disposition.

First Regional Bank is the first institution to fail in California in 2010 and the 14th FDIC-insured institution to fail in the nation.

Bank Prospector shows First Regional Bank had carried a leverage ratio of 6%, a nonaccrual balance of approximately $300 million, OREO of approximately $73 million, and noncurrent distressed totals of 17.13% of their portfolio. First Regional Bank collapsed under heavy pressure from construction multifamily, and residential loans, with approximately 45% of their residential loans being noncurrent. BankProspector captures ten (10) separate bank contacts that work at First Regional Bank.

The Federal Deposit Insurance Corporation (FDIC), in conjunction with the Georgia Department of Banking and Finance, continued its 2010 roll of shutting down banks with the January 29, 2010 closing of Community Bank and Trust of Cornelia, GA.

Following the closure, SCBT announced that its bank subsidiary would enter an $827.7 million purchase and assumption agreement to envelope Community Bank & Trust. The 36 branches of the full service Georgian Community Bank & Trust will reopen as branches of SCBT, N.A., but under the name Community Bank & Trust.

The FDIC estimates the cost associated with the bank failure to the Deposit Insurance Fund (DIF) will be $354.5 million. Community Bank & Trust is the second bank in Georgia, and the 13th FDIC-insured institution, to fail during 2010.

BankProspector shows Community Bank & Trust carries a 9% leverage ratio, $12 million in nonaccrual real estate loans, and over $40 million in OREO. Ballooning noncurrent loan portfolio percentages, especially in Construction and Multifamily asset types at 26% and 24% respectively, crippled Cornelia, GA Community Bank & Trust.

On Friday, January 29, 2010, the Washington Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) closed American Marine Bank of Bainbridge Island, WA. This was following December 2009 attempts by American Marine Bank to improve its lending and management policies, and failed hopes that an investor would rescue the 61-year-old Washington state institution.

American Marine Bank, much like other banks in the region, has experienced defaults in real estate and participation loans since the economy’s real estate-fueled downturn began. With homebuilders and developers unable to provide debt service, American Marine Bank began to buckle as FDIC insurance premiums and costs increased. From the close of Q3 2008 to Q3 2009, the bank’s loan losses ballooned ten-fold from $1.8 million to over $18 million.

The 11 branches of American Marine Bank are in the process of being transitioned to Columbia State Bank.

The Federal Deposit Insure Corporation and Columbia State Bank entered into a loss-share transaction on $255.1 million of American Marine Bank’s assets. Columbia State Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be approximately $59 million. Columbia State Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. American Marine Bank is now the15th FDIC-insured banking institution to fail during 2010.

From the latest (Q3 2009) call reports, BankProspector reports American Marine Bank with leverage ratio of 4%, nonaccrual real estate loans over $25 million, and OREO balances over $7 million. American Marine Bank fell mainly due to their Construction and Multifamily portfolio, 35% and 16% of which was noncurrent.