Banking Conditions Deteriorate

Although this has been a workweek shortened by the President's Day federal holiday, more bank shutdowns by the FDIC are expected after the close of business today. At the beginning of the year, I posted a list of what I felt were the 50 banks most likely to fail in 2009. Thirteen banks have already failed in 2009 and 6 of those were on my list. New data is now available which shows considerable deterioration in the condition of our nation's banks and I would like to add three banks in particular to my list before the FDIC announces this week's closings.

The first addition I'd like to make, debuting at 51 on my list is Heritage Community Bank of Glenwood, Illinois. Heritage Community would have made my first list except that I thought that it had already changed hands. First Community Financial Partners, the holding company of First Community Bank of Joliet, announced on October 30, 2009 a letter of intent to acquire a major interest in Heritage Community Bank. That deal was expected to close by the end of 2008. It hasn't.

Meanwhile, Heritage Community's Texas ratio (a measure of loans more than 90 days delinquent over combined equity and reserves for loan losses) has exploded from 143.3% on September 30, 2008 to 514.2% by the end of the year. CEO John Saphir, who had hoped to retire by the end of 2008, tells Crain's Chicago Business, "We're in discussions with an equity investor group to increase the bank's capital and support its loan portfolio." With what may be the highest Texas ratio in the country, I don't expect those discussions to go far.

The second addition I'm making to the list is First Piedmont Bank of Windner, Georgia. Georgia has the nation's largest number of troubled banks, a fact that was trumpeted last Sunday on the cover of the Atlanta Journal-Constitution. The AJC listed 42 Georgia banks with Texas ratios over 100%. First on their list was FirstBank Financial Services which has already been closed. Second on their list is Omni National Bank, which is number 37 on my list. Third on their list is First Piedmont which I am bringing in at number 52. First Piedmont's Texas ratio rose from 189% to 373% during the final 3 months of 2008. Georgia banks were already running precariously, the cover story on the Sunday paper certainly didn't help things.

Georgia, Florida and Illinois have the largest number of troubled banks. I expect to be adding more banks from these three states to my list in the coming weeks. Unfortunately, I don't have any new data on Florida banks yet.

The third bank I'm adding to my list is Vineyard Bank of Rancho Cucamonga, California. The Califonia Department of Financial Institutions has been more aggressive than other states in shutting down troubled banks, so although Vineyard is not as bad off as banks in many other states, it's near the top of the list for banks in California. The FDIC is also getting its west coast office in Irvine, CA up to full speed, expecting to shut down more banks in that part of the country. While Vineyard is the only California bank I am adding this morning, Downey is not far behind.

So as we go into another FDIC Friday, here is my updated list of 50 53 Banks Most Likely to Close in 2009.

1 Magnet Bank, Salt Lake City, UT
2 Citizens Community Bank, Ridgewood, NJ
3 FirstBank Financial Services, McDonough, GA
4 Westsound Bank, Bremerton, WA
5 Suburban Federal Savings Bank, Crofton, MD
6 America West Bank, Layton, UT
7 The Community Bank, Loganville, GA
8 Silver Falls Bank, Silverton, OR
9 Ocala National Bank, Ocala, FL
10 Sun Security Bank, Ellington, MO
11 Eastern Savings Bank, FSB, Hunt Valley, MD
12 Alliance Bank, Culver City, CA
13 FirstCity Bank, Stockbridge, GA
14 Chestatee State Bank, Dawsonville, GA
15 First Security National Bank, Norcross, GA
16 Ocean Bank, Miami, FL
17 First Georgia Community Bank, Jackson, GA
18 Family Bank and Trust Co., Palos Hills, IL
19 Southern Community Bank, Fayetteville, GA
20 BankCherokee, Saint Paul, MN
21 First Tuskegee Bank, Tuskegee, AL
22 Federal Trust Bank, Sanford, FL
23 Pinnacle Bank, Beaverton, OR
24 Lake Country Community Bank, Morristown, MN
25 Mesa Bank, Mesa, AZ
26 Bank of Wyoming, Thermopolis, WY
27 1st American State Bank of Minnesota, Hancock, MN
28 First State Bank of Altus, Altus, OK
29 EvaBank, Eva, AL
30 Strategic Capital Bank, Champaign, IL
31 Ebank, Atlanta, GA
32 Polk County Bank, Johnston, IA
33 Parkway Bank, Rogers, AR
34 Security Bank of Gwinnett County, Suwanee, GA
35 State Bank of Park Rapids, Park Rapids, MN
36 Herrin Security Bank, Herrin, IL
37 Omni National Bank, Atlanta, GA
38 Northpointe Bank, Grand Rapids, MI
39 Towne Bank of Arizona, Mesa, AZ
40 Haven Trust Bank, Duluth, GA
41 Timberland Bank, El Dorado, AR
42 Blue Ridge Savings Bank, Inc., Asheville, NC
43 First Piedmont Bank, Winder, GA
44 Select Bank, Grand Rapids, MI
45 Oxford Bank, Oxford, MI
46 Security Bank of North Metro, Woodstock, GA
47 MetroPacific Bank, Irvine, CA
48 Earthstar Bank, Southampton, PA
49 Neighborhood Community Bank, Newnan, GA
50 The Home Savings and Loan Company, Youngstown, OH
51 Heritage Community Bank, Glenwood, IL
52 First Piedmont Bank, Windner, GA
53 Vineyard Bank, NA, Rancho Cucamonga, CA