2009 now has its first two bank failures of the year, with the Federal Deposit Insurance Corp. and state regulators on Friday shutting down two small banks in Illinois and Washington; the closures represent the 26th and 27th bank failures during the current credit meltdown. And more are on the way, if the profile of the closed banks is any indication. Two-branch National Bank of Commerce, based in Berkeley, Ill., saw its deposits head to Oak Brook, Ill.-based Republic Bank of Chicago, the FDIC said in a Friday statement. As of Jan. 7, 2009, National Commerce Bank had total assets of $430.9 million and total deposits of $402.1 million. In addition to assuming all of the failed bank’s deposits, the FDIC said that Republic Bank agreed to purchase approximately $366.6 million in assets at a discount of $44.9 million. Estimated hit to the Deposit Insurance Fund: $97.1 million. Bank of Clark County, in Vancouver, Washington — another small bank, with total assets of $446.5 million and total deposits of $366.5 million — saw Roseburg, Ore.-based Umpqua Bank assume its insured deposits after the FDIC shut the bank down Friday. There were approximately $39.3 million in uninsured deposits held in approximately 138 accounts that potentially exceeded the insurance limits, the FDIC said, and Umpqua will not assume approximately $117.8 million in brokered deposits. Estimated cost to the Deposit Insurance Fund: between $120 and $145 million. Both banks clearly specialized in asset-based lending, and were heavily invested into both residential construction and commercial real estate lending; the Bank of Clark County, for example maintained loans secured by real estate totaling more than $339.7 million of its $46.5 million in total assets, according to the latest call report data provided by the FDIC. The majority of small banks that are now failing have this sort of common thread running among them: a heavy shift of their asset mix into CRE and construction lending, with little other banking activity in other areas to offset souring asset performance. Or, put another way: asset-based lending is great if the assets you’ve lent against are worth something. Write to Paul Jackson at paul.jackson@housingwire.com.

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