US bank failures reach 133

Sunday, December 13, 2009
LOS ANGELES: US regulators closed Republic Federal Bank, NA, Solutions Bank and Valley Capital Bank on Friday, bringing the total number of bank failures so far this year to 133, the Federal Deposit Insurance Corp said.

Community and regional banks have been failing at the highest annual level since 1992, as the industry grapples with souring loans tied to mortgages and commercial real estate loans made during the credit boom. Failures are expected to peak next year, government officials have said. The banking industry’s recovery generally lags the economy. Republic Federal Bank, the 13th FDIC-insured institution to fail in Florida this year, had assets of about $433 million and total deposits of about $352.7 million.

FDIC entered into a purchase and assumption agreement with 1st United Bank in Boca Raton, which will assume all of Republic’s deposits. Solutions Bank in Kansas had assets of about $511.1 million and total deposits of about $421.3 million as of Sept 30. Regulators entered into an agreement with Arvest Bank of Arkansas, which will assume Solutions Bank’s deposits. And the third lender, Valley Capital Bank of Arizona, had assets of just $40.3 million and total deposits of about $41.3 million. Enterprise Bank & Trust, of Missouri, will assume its deposits.

The largest failure of the financial crisis was Washington Mutual, which collapsed in September 2008 and had more than $300 billion in assets. The FDIC estimated that the costs to the Deposit Insurance Fund, the fund that safeguards bank deposits, will be $122.6 million in the case of Republic Federal Bank, $122.1 million for the Solutions Bank transaction, and a mere $7.4 million for Valley Capital.

The fund has a negative balance, depleted by the costs of resolving collapsed banks. The FDIC, which insures bank accounts up to $250,000, is improving its cash position by having banks prepay three years of industry fees.

It also has the ability to tap a $500 billion line of credit with the US Treasury Department. FDIC Chairman Sheila Bair said conditions are starting to slowly improve in the banking industry but that the pace of failures will remain elevated through 2010