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Bank Failure Friday: 7 Banks Go Down, 3 with No Buyer

It was another busy Friday for regulators, as they closed seven banks, bringing this year’s total to 140. As always, we’ve updated our complete list of failed banks.


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The failures figure to continue in 2010. FDIC Chair Sheila Bair said last month failures will “peak” next year. The FDIC’s recently announced budget for 2010 reflects that: In order the handle bank closings, the agency plans to add 1,600 temporary employees to its staff of about seven thousand. The FDIC said last month that its list of “problem” banks has risen to 552.

All told, Friday’s failures cost the FDIC about $1.8 billion. The agency earlier this year dealt with its deficit by arranging for insured banks to prepay three years of assessments in advance, which is expected to raise $45 billion.

Not surprisingly, Friday’s biggest failures were in California. The biggest institution to tumble was First Federal Bank of California, a bank with 39 branches and that specialized in home mortgage lending. OneWest, the bank formed by private equity investors to take over IndyMac, the FDIC’s costliest failure of the last two years, acquired First Federal’s deposits and most of its assets. Like IndyMac, First Federal was sunk by losses from unconventional mortgages.

Imperial Capital Bank, though smaller, cost the FDIC the most Friday, about $619 million. It was sunk by risky loans for apartments and commercial mortgages, the Los Angeles Times reports. City National Bank of Los Angeles acquired its deposits and most of its assets.

Three of the banks closed Friday were in such poor shape that the FDIC could not find a buyer. In the case of Citizens State Bank of Michigan, the FDIC will itself operate a temporary bank for 45 days in order to give depositors time to transfer their money elsewhere. Before this year, the FDIC had not used that authority since 1982.

In the case of Illinois-based Independent Bankers’ Bank, a bank that provided services to 450 client banks in four states, the FDIC says that it will continue to operate the bank “to allow preexisting marketing efforts for the bank to continue.” No end point was given.

And in the case of RockBridge Commercial Bank in Atlanta, the FDIC said it would simply mail checks to depositors for the insured funds.

The two other institutions to fail Friday were New South Federal Savings Bank of Alabama and Peoples First Community Bank of Florida. The FDIC was able to find acquiring institutions for those: Beal Bank of Alabama for New South and Hancock Bank of Mississippi for Peoples First.

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