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article imageRegulators Close 3 More U.S. Banks, 98 Failures in 2009

By Chris Dade     Oct 3, 2009 in Business
The number of bank failures in the U.S. in 2009 reached 98 on Friday evening after regulators closed three banks, one each in Minnesota, Michigan and Colorado.
As what Bloomberg describes as the "worst financial crisis in more than seven decades" continues to take its toll on the U.S. economy the latest three bank failures are set to cost the Federal Deposit Insurance Corporation (FDIC) $293.3 million.
Since the Great Depression of the 1930s the FDIC has insured customer deposits in the event of a bank failing, the current amount that is covered by that insurance being $250,000 for each depositor.
According to CNN customers of the failed banks, all of which opened on Saturday under the moniker of the three different institutions who have agreed to assume their deposits and some or all of their assets, can still access the money in their accounts via check, ATM or debit card.
It is not known yet which, if any, of the branches of the failed banks will be closed but borrowers have been advised to continue making any payments that are due in the same way as they have done previously.
Jennings State Bank of Spring Grove, Minnesota was closed by state regulators. The bank had $52.4 million in deposits, and Central Bank of Stillwater, Minnesota will be assuming that entire amount, as well as Jennings' $56.3 million in assets, although the FDIC has entered a loss-share agreement with Central Bank for $37.7 million of those assets. In all the fourth financial institution to fail in Minnesota this year will cost the FDIC some $11.7 million.
State regulators also closed Warren Bank of Warren, Michigan. The Huntington National Bank in Columbus, Ohio, has agreed to assume the $501 million in deposits held by Warren but will only acquire $83 million of Warren's $538 million in assets. The FDIC will retain the remaining $455 million in assets for later disposal, with the failure of Warren Bank set to cost it close to $275 million. One other bank had failed in Michigan this year, prior to the closure of Warren Bank.
The Office of the Comptroller of the Currency was responsible for closing Southern Colorado National Bank of Pueblo, the state's third failing bank of 2009. Legacy Bank of Wiley, Colorado will be buying $39.5 million in assets held by the failed bank and will assume $31.9 million in deposits. Bloomberg reports that Legacy will be paying a one per cent premium for the deposits. There is a loss-share agreement between Legacy and the FDIC worth $25.5 million, with the closure of Southern Colorado National Bank due to cost the FDIC $6.6. million.
In 1992 the savings-and-loan crisis saw 181 banks fail in the U.S. and the failures in 2009 will be the highest annual total since then.
The large number of banks closing their doors has reduced considerably the amount in the FDIC's insurance fund. It has gone from $45 billion 12 months ago to a current total of $10.1 billion.
As a consequence, to build the fund back up the FDIC is set to ask banks to pay their deposit insurance premiums three years in advance, thereby replenishing the fund by $45 billion.
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