Regulators have dealt another setback to TierOne Corp. in Lincoln, Neb., by rejecting the company's proposal to sell half its branches to Great Western Bank.
The decision, announced Friday, leaves few options available to the $2.9 billion-asset TierOne. It is operating under a regulatory order from the Office of Thrift Supervision requiring it to raise capital quickly or find a buyer.
A prompt-corrective-action directive issued March 31 gave the company until May 31 to close a binding merger deal or raise enough capital to become "adequately capitalized."
"The options of TierOne are very limited at this point," said Ken Thomas, an independent banking consultant and economist in Miami. "This was their only option, really."
TierOne planned to sell 32 of its 69 branches, along with $1.1 billion of deposits and $800 million in loans, to Great Western for $39 million. The company declined to comment on the decision.
In its order rejecting the sale, the OTS said that, though it would supply a temporary capital boost, the sale would leave the thrift undercapitalized by the end of 2010. It also said TierOne's level of classified assets and nonperforming assets would remain at "unacceptably high levels" and the sale would erode its liquidity.
Great Western, in Watertown, S.D., is a unit of National Australia Bank Ltd.
Great Western appeared well-suited to acquire the branches, but Thomas said the deal would have left TierOne little value with which the Federal Deposit Insurance Corp. could lure a bidder if it ultimately fails.
TierOne has not reported financial results since regulators sought a restatement of its second-quarter 2009 results. A recent filing with the Securities and Exchange Commission showed that, at Dec. 31, TierOne Bank had a leverage ratio of 3.28% and a total risk-based capital ratio of 5.41%.
