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U.S. bank failures in 2010 surpass 100

U.S. bank failures this year have surpassed a bleak milestone of 100 as regulators shut down banks in Georgia, Florida, South Carolina, Kansas and Minnesota.
/ Source: The Associated Press

U.S. bank failures this year have surpassed a bleak milestone of 100 as regulators shut down banks in Georgia, Florida, South Carolina, Kansas and Minnesota.

The five bank seizures announced Friday bring to 101 the failures so far in 2010. The pace of bank closures this year is well ahead of that of last year, which saw a total 140 bank shuttered amid the recession and mounting loan defaults.

The Federal Deposit Insurance Corp. said it took over Crescent Bank and Trust Co., based in Jasper, Ga., with about $1 billion in assets; Sterling Bank of Lantana, Fla., with $407.9 million in assets; Williamsburg First National Bank of Kingstree, S.C., $139.3 million in assets; Thunder Bank of Sylvan Grove, Kan., $32.6 million; and Community Security Bank of New Prague, Minn., $108 million.

Renasant Bank, based in Tupelo, Miss., agreed to assume the assets and deposits of Crescent Bank and Trust. Iberiabank of Lafayette, La., is acquiring the assets and deposits of Sterling Bank. First Citizens Bank and Trust Co. of Columbia, S.C., is assuming the assets and deposits of Williamsburg First National Bank, while Bennington State Bank in Salina, Kansas, is taking the assets and deposits of Thunder Bank. Roundbank of Waseca, Minn., is assuming those of Community Security Bank.

The failure of Crescent Bank and Trust is expected to cost the deposit insurance fund about $242.4 million. The resolution of Sterling Bank is estimated to cost $45.5 million; that of Williamsburg First National Bank, $8.8 million; Thunder Bank, $4.5 million; and Community Security Bank, $18.6 million.

With 101 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, which was already a brisk year for shutdowns. By this time last year, regulators had closed 64 banks. The pace has accelerated as banks' losses mount on loans made for commercial property and development.

The number of bank failures is expected to peak this year and be slightly higher than the 140 that fell in 2009. That was the highest annual tally since 1992, at the height of the savings and loan crisis. Twenty-five banks failed in 2008, the year the financial crisis struck with force, and only three succumbed in 2007.

As losses have mounted on loans made for commercial property and development, the growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, and its deficit stood at $20.7 billion as of March 31.

The number of banks on the FDIC's confidential "problem" list jumped to 775 in the first quarter from 702 three months earlier, even as the industry as a whole had its best quarter in two years.

A majority of institutions posted profit gains in the January-March quarter. But many small and midsized banks are likely to continue to suffer distress in the coming months and years, especially from soured loans for office buildings and development projects.

The FDIC expects the cost of resolving failed banks to total around $60 billion from 2010 through 2014.

The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.

Depositors' money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul legislation signed this week by President Barack Obama.