Regulators shut down 2 banks in Florida and 1 in California; U.S. bank failures reach 123 this year.
U.S. regulators on Friday shuttered two more banks in Florida and one in California. Though there are some early signs of economic recovery, bank failures continue unabated. This takes the total number of bank failures to 123, compared to 25 in 2008 and 3 in 2007.
The weak economy continues to weigh heavily on banks with a stream of loan defaults. As the industry has to tolerate bad loans that were made during the credit explosion, the trouble in the banking system goes even deeper, increasing the possibility of more bank failures. However, the regulators are trying to avoid panic by seizing banks slowly. Also, the slow seizing could be a strategy as it is hard to get buyers for so many failed banks.
The failed banks were -- Century Bank, FSB of Sarasota, Florida with $728 million in assets and $631 million in deposits, Orion Bank of Naples, Florida with about $2.7 billion in assets and $2.1 billion in deposits and Pacific Coast National Bank of San Clemente, California with $134.4 million in assets and $130.9 million in deposits.
These bank failures represent another sizable impact on the Federal Deposit Insurance Corporation's (FDIC) fund for protecting customer accounts, as it has been appointed receiver for these banks. The failure of Century Bank is expected to cost the deposit insurance fund about $344 million, Orion Bank's failure will cost about $615 million and the failure of Pacific Coast National Bank is expected to cost about $27.4 million.
The FDIC insures deposits at 8,195 institutions with roughly $13.5 trillion in assets. When a bank fails, it reimburses customers for deposits of up to $250,000 per account. The outbreak of bank failures has significantly stretched the regulator's deposit insurance fund. At Jun 30, 2009, the fund corpus fell to $10.4 billion, the lowest since 1993, from $13.0 billion in the prior quarter.
IberiaBank, based in Lafayette, Louisiana will assume both Florida-based banks' $2.731 billion in deposits. Iberiabank also entered into a loss-share agreement with the FDIC on $656 million of Century Bank's assets and on $1.9 billion of Orion Bank's assets.
Tustin, California-based Sunwest Bank will assume all of Pacific Coast National Bank's deposits and essentially all of its assets.
In the second quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 416 from 305 in the first quarter. This is the highest since the savings and loan crisis in 1994. ??Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years.
