More US banks shut down in first quarter

WASHINGTON (AP) — Regulators last week shut down small banks in Illinois and Nevada, lifting the number of US bank failures so far this year to 28 after 157 succumbed in 2010 to the gutted economy and mounting bad loans.

The Federal Deposit Insurance Corp. seized Western Springs National Bank and Trust, in Western Springs, Ill., with $186.8 million in assets and $181.9 million in deposits. It also closed Las Vegas-based Nevada Commerce Bank, with $144.9 million in assets and $136.4 million in deposits.

The failures of Western Springs and Nevada Commerce are expected to cost the deposit insurance fund $31 million and $31.9 million, respectively.

Heartland Bank and Trust Co., based in Bloomington, Ill., will assume the assets and deposits of Western Springs National Bank. Los Angeles-based City National Bank is taking over Nevada Commerce Bank.

The FDIC and Heartland Bank and Trust will share losses on $100.8 million of Western Springs’ loans and other assets. It will share losses on $111.1 million of Nevada Commerce Bank’s assets with City National.

Illinois has been one of the hardest-hit states for bank failures. Sixteen banks were shuttered in the state last year. California, Florida and Georgia also have seen large numbers of bank failures.

The 157 bank closures last year topped the 140 shuttered in 2009. It was the most in a year since the savings-and-loan crisis two decades ago.

The FDIC has said that 2010 likely would mark the peak for bank failures. Already this year the pace of closures has slowed: By this time last year, regulators had closed 42 banks.

The 2009 failures cost the insurance fund about $36 billion. The failures last year cost around $21 billion, a lower price tag because the banks that failed in 2010 were smaller on average. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three were closed in 2007.

The growing number of bank failures has sapped billions of dollars out of the deposit insurance fund. It fell into the red in 2009, and its deficit stood at $7.4 billion as of Dec. 31.

The number of banks on the FDIC’s confidential “problem” list rose to 884 in the final quarter of last year from 860 three months earlier. The 884 troubled banks is the highest number since 1993, during the savings-and-loan crisis.

The FDIC expects the cost of resolving failed banks to total around $52 billion from 2010 through 2014.

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.