In a sign of how rapidly a bank's fortunes can falter in this economy, Prosperan Bank of Oakdale went from a healthy lending institution to a dead one in seven months.

The 11-year-old bank, which had $200 million in assets and three branches, was shut down at 6 p.m. by state regulators after recently taking large losses on real estate loans. Prosperan is the 118th bank to fail nationwide this year -- the most in a year since the end of the savings and loan debacle in the early 1990s -- and the seventh to fail in Minnesota since the start of the current credit crisis.

The Minnesota Department of Commerce closed Prosperan and immediately named the Federal Deposit Insurance Corp. (FDIC) as receiver. The bank was then sold to Alerus Financial of Grand Forks, N.D., which has assumed all the deposits and most of the assets of Prosperan.

The Oakdale and Maplewood branches of Prosperan will reopen today as Alerus, while the Prosperan branch in Minnetonka will reopen Monday. Prosperan depositors will automatically shift to Alerus.

An FDIC spokesman said the agency solicited bids from 355 banks nationwide but only got four bids from three bidders on Nov. 3. He declined to disclose the names of the other bidders.

"[Prosperan] experienced significant losses in acquisition, development and construction and commercial real estate loan portfolios, coupled with poor credit administration practices," said Greg Hernandez, an FDIC spokesman.

Prosperan's collapse was quick and largely unexpected. The bank's financial ratios looked solid as of March 31, the end of its first quarter. But on Oct. 30, the bank revised its third-quarter financial statements to reflect a $12 million charge to increase its loan-loss reserves, according to a filing with the FDIC. Largely because of that charge, Prosperan reported total equity of negative $4 million -- effectively making the bank insolvent.

Formerly known as Washington County Bank, Prosperan changed its name in November 2007 to reflect its expansion as it opened branches outside Washington County. "Prosperan is a form of the word 'prosper,'" the bank explains on its website. "It means to be successful or fortunate, especially in financial respects, to thrive and flourish."

Missy Keney, a spokeswoman for Alerus, said the bank was still reviewing Prosperan's loan portfolio and did not know how the bank's financial position changed so abruptly. "We're not sure if it's them just not recognizing the bad loans, or they did know and just not say anything," she said. "We just don't know."

This is Alerus' second acquisition of a failed banking institution in the Twin Cities this year. The 76-year-old North Dakota bank, which has $1.09 billion in assets and 17 branches, in July acquired $140 million in Minneapolis-based deposits from the failed BankFirst, which was based in Sioux Falls, S.D.

The FDIC and Alerus have entered into a loss-share agreement on about $173.9 million of Prosperan's assets, which means the two institutions will share in the losses on these loans. The FDIC estimates the cost to its insurance fund will be $60.1 million.

Including Prosperan, regulators closed four banks across the country Friday. The others were in St. Louis, Detroit and Sparta, Ga. Regulators, accelerating closures, have shuttered 20 banks in just two weeks.

Chris Serres • 612-673-4308