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Regulators shut Columbia Bank in Kansas

/ Source: The Associated Press

Federal regulators on Friday shut down Kansas bank Columbian Bank and Trust Company.

The Federal Deposit Insurance Corp. was appointed receiver of Columbian Bank of Topeka, Kan., which had $752 million in assets and $622 million in deposits as of June 30.

The FDIC said the bank's deposits will be assumed by Citizens Bank and Trust of Chillicothe, Mo. Its nine offices will reopen Monday as branches of Citizens Bank. Depositors of Columbian Bank will continue to have full access to their deposits, the agency said.

It was the ninth failure this year of an FDIC-insured bank.

That compares with three failures in all of 2007. More banks are in danger of failing this year, agency officials have said.

The FDIC estimated the resolution of Columbian Bank will cost the deposit insurance fund around $60 million.

Regular deposit accounts are insured up to $100,000.

There were about $46 million in uninsured deposits held in 610 accounts at Columbian Bank that potentially exceeded the insurance limit, the FDIC said.

Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.

The FDIC has been beefing up its staff of examiners to handle the anticipated spike in bank failures this year. agency.

The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.

The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.

FDIC officials have said the agency expects to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $53 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.

FDIC Chairman Sheila Bair said recently she expects turbulence in the banking industry to continue well into next year, and more banks to appear on the agency's internal list of troubled institutions.

Of the 8,500 or so banks in the country, 90 were considered to be in trouble in the first quarter. The FDIC doesn't disclose the banks' names.

Only 13 percent of banks that make the list fail, on average, and most are nursed back to health or acquired by stronger institutions, according to Bair.

Federally insured banks and thrifts set aside a record $37.1 billion to cover losses from soured mortgages and other loans in the first quarter, when profits were nearly halved.