By Marcy Gordon
Saturday, October 23, 2010; A12
Regulators have shut down a total of seven banks in Florida, Georgia, Illinois, Kansas and Arizona, lifting to 139 the number of U.S. banks that have fallen this year as soured loans have mounted and the economy has sputtered.
The Federal Deposit Insurance Corp. on Friday took over the banks. The largest was Hillcrest Bank, based in Overland Park, Kan., with $1.6 billion in assets.
A newly chartered bank subsidiary of Boston-based NBH Holdings was set up to take over Hillcrest's assets and deposits. The new subsidiary will be called Hillcrest Bank.
The agency and Hillcrest Bank are sharing losses on $1.1 billion of the failed bank's assets. Its failure is expected to cost the FDIC $329.7 million.
Also shuttered were First Bank of Jacksonville in Jacksonville, Fla., with $81 million in assets; Progress Bank of Florida, based in Tampa, with $110.7 million in assets; First National Bank of Barnesville in Barnesville, Ga., with $131.4 million in assets; Gordon Bank of Gordon, Ga., with $29.4 million in assets; First Suburban National Bank in Maywood, Ill., with $148.7 million in assets; and First Arizona Savings, based in Scottsdale, Ariz., with assets of $272.2 million.
With 139 closures nationwide this year, the pace of bank failures exceeds that of 2009, which was already a brisk year for shutdowns with a total of 140. By this time last year, regulators had closed 106 banks.
The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans, which has brought delinquent loan payments and defaults by commercial developers.
The 2009 total of bank failures was the highest annual tally since 1992, at the height of the savings-and-loan crisis. The 2009 failures cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.
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 $15.2 billion as of June 30.
The number of banks on the FDIC's confidential "problem" list jumped to 829 in the second quarter from 775 three months earlier, even as the industry as a whole had its best quarter since 2007, making $21.6 billion in net income. Banks with more than $10 billion in assets - only 1.3 percent of the industry - accounted for $19.9 billion of the total earnings.
The cost of Friday's failures is estimated by the agency at $478 million. The FDIC expects the cost of resolving failed banks to total about $52 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. On Tuesday, the FDIC decided against raising premiums after determining the losses from bank failures this year were lower than anticipated. The agency also proposed a new plan for ensuring that the insurance fund reaches the level mandated by Congress.
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 law enacted in July.
- Associated Press