Regulators seize 3 banks, in Fla. and Calif., bringing the toll of failures to 123

Regulators shut down two banks in Florida and one in California on Friday, boosting to 123 the number of U.S. bank failures this year as loan defaults rise in the worst financial climate in decades.

The Federal Deposit Insurance Corp. took over Orion Bank, based in Naples, Fla., with about $2.7 billion in assets and $2.1 billion in deposits, and Sarasota-based Century Bank, with $728 million in assets and $631 million in deposits. Pacific Coast National Bank in San Clemente, Calif. was also shut down. It had $134.4 million in assets and $130.9 million in deposits.

The failure of Orion Bank will cost the federal deposit insurance fund an estimated $615 million. Century Bank's failure will cost $344 million, while Pacific Coast National Bank's will cost $27.4 million.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions of dollars out of the federal deposit insurance fund. It has fallen into the red.

To replenish the fund, the FDIC on Thursday mandated for the first time that the roughly 8,100 insured banks and savings institutions pay in advance about $45 billion in premiums that would have been due over the next three years. The idea is for banks to spread the costs over three years rather than pay a one-time fee that would deplete their capital reserves.

The FDIC expects the cost of bank failures to grow to about $100 billion over the next four years.

Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. The FDIC still has about $21 billion cash in loss reserves apart from the insurance fund. It can also tap a Treasury Department credit line of up to $500 billion.

Last week brought the closure of the fourth-biggest bank to fail this year: San Francisco's United Commercial Bank, with $11.2 billion in assets. East West Bancorp, parent of East West Bank of Pasadena, Calif., agreed to buy all of United Commercial's deposits and most of its assets.

Banks have been especially hurt by failed real estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on loans. Failures have been concentrated in California, Georgia and Illinois. Pacific Coast National Bank's failure was the 15th in California this year. Eleven Florida banks have failed this year.

If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks hold large concentrations of these loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.

The 123 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $28 billion this year. They compare with 25 last year and three in 2007.