Kansas Bank Is Closed In Ninth Failure in '08

Federal regulators yesterday shut down Kansas's Columbian Bank and Trust Company, which was struggling with losses on soured real estate loans.

The Federal Deposit Insurance Corp. was appointed receiver of the Topeka-based bank, which had $752 million in assets and $622 million in deposits as of June 30.

The agency did not give a reason for the closure, but Columbian reported $92 million in delinquent loans in the second quarter, citing a "volatile real estate market." The bank set aside $9.2 million for loan losses in the first quarter, up nearly 30 percent from the $7.1 million it set aside in the first quarter of 2007.

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.

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.

The largest failure this year was that of savings and loan association 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 at branches for hours to demand their money. 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 to depositors at IndyMac. The fund, currently at $53 billion, is expected to take a hit of $4 billion to $8 billion from IndyMac.

FDIC Chairman Sheila C. Bair said recently that she expects turbulence in the banking industry to continue well into next year as more banks are added to the agency's internal list of troubled institutions.

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

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.

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

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