'09 bank failures hit 84 as FDIC seizes 3 more

— Regulators on Friday shut down small banks in California, Maryland and Minnesota, pushing to 84 the number of bank failures this year amid the soured economy and rising loan defaults.

The Federal Deposit Insurance Corp. took over the three banks: Affinity Bank, based in Ventura, Calif., with about $1 billion in assets and $922 million; Baltimorebased Bradford Bank, with $452 million in assets and $383 million in deposits; and Mainstreet Bank, based in Forest Lake, Minn., with assets of $459 million and deposits of $434 million.

Pacific Western Bank, based in San Diego, agreed to assume the deposits and assets of Affinity Bank. Manufacturers and Traders Trust Co., based in Buffalo, N.Y., has agreed to assume the deposits and assets of Bradford Bank. The nine branches of Bradford Bank will reopen today as offices of M&T.

Central Bank, based in Stillwater, Minn., is assuming the deposits and assets of Mainstreet Bank, whose eight branches will reopen today as offices of Central Bank.

In addition, the FDIC agreed to share with M&T losses on about $338 million of Bradford Bank's loans and other assets, and struck a similar agreement with Central Bank for about $268 million of Mainstreet Bank's loans and assets.

The failure of Bradford Bank is expected to cost the deposit insurance fund an estimated $97 million; that of Mainstreet Bank about $95 million, the FDIC said.

The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end ofJune from 305 in the first quarter. That's the highest number since June 1994, during the savings-andloan crisis.

Last week, Guaranty Bank became the second-largest U.S. bank to fail this year after the big Texas lender was shut down and most of its operations sold at a loss of billions of dollars for the government to a major Spanish bank. The failure, the 10th-largest in U.S. history, is expected to cost the insurance fund an estimated $3 billion.

The sale of most of Austinbased Guaranty's operations to the U.S. division of Banco Bilbao Vizcaya Argentaria SA, Spain's No. 2 bank, market the first time a foreign bank has bought a failed American bank during the current financial crisis.

The insurance fund has been so depleted by the epidemic of collapsing financial institutions that some analysts have warned it could sink into the red by the end of this year. The fund fell 20 percent to $10.4 billion at the end of June, the FDIC reported Thursday.

That's its lowest point since 1992, at the height of the savingsand-loan crisis. The agency estimates bank failures will cost the fund about $70 billion through 2013.

U.S. banks overall lost $3.7 billion in the second quarter, compared with a profit of $7.6 billion in January-March, according to the FDIC. Surging levels of soured loans at banks dragged down profits in the April-June period.

FDIC Chairman Sheila Bair said Thursday that there were no immediate plans to borrow money from the government to replenish the insurance fund by tapping the agency's $500 billion credit line with the Treasury.

Business, Pages 30 on 08/29/2009

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