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WASHINGTON — Regulators on Friday shut down Guaranty Financial Group Inc., a big lender felled by losses on loans to homebuilders and borrowers, in the second-largest U.S. bank failure this year.
It marked the 81st failure of a U.S. bank in 2009, a mounting toll and the most in a year since 1992 at the height of the savings-and-loan crisis.
The Federal Deposit Insurance Corp. was appointed receiver of Guaranty Financial, based in Austin, Texas, which had about $13 billion in assets and $12 billion in deposits as of June 30. Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank, agreed to buy all the failed bank's deposits and $12 billion of the assets. It was the first foreign bank to buy a failed U.S. bank.
The failure of Guaranty Financial is expected to cost the deposit insurance fund an estimated $3 billion.
In contrast to the big bank failures early in the financial crisis, many of the recently shuttered banks were undone not by exotic mortgage products but by garden-variety loans.
At the same time, a knot of big, complex banks collapsing in recent months is sapping billions from the federal deposit insurance fund that insures regular accounts up to $250,000, spurring regulators to court potential buyers from the world of private investment.
The FDIC last week seized Colonial BancGroup Inc., a big lender in real estate development, and sold its $20 billion in deposits, 346 branches in five states and about $22 billion of its assets to BB&T Corp.
It was the biggest bank failure so far this year, and the sixth-largest in U.S. history, expected to cost the insurance fund $2.8 billion.
While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, experts say. Many regional banks like Montgomery, Ala.-based Colonial hold large numbers of them. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans.
Also Friday, the FDIC seized two small banks in Georgia and one in Alabama: ebank, located in Atlanta, with $143 million in assets and $130 million in deposits; First Coweta, based in Newnan, Ga., with $167 million in assets and $155 million in deposits; and CapitalSouth Bank, based in Birmingham, Ala., with $617 million in assets and $546 million in deposits.
The agency expects bank failures will cost the fund around $70 billion through 2013. The fund stood at $13 billion — its lowest level since 1993 — at the end of March. It has slipped to 0.27 percent of total insured deposits, below the minimum mandated by Congress of 1.15 percent.
The costliest failure was the July 2008 seizure of big California lender IndyMac Bank, on which the fund is estimated to have lost $10.7 billion.
Among the 81 banks closed so far this year — compared with 25 last year and three in all of 2007 — were a stream of smaller institutions, many felled by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment. Their business was a far cry from the complex securities favored by Wall Street investment banks that precipitated the financial meltdown.
The average cost to the fund of a bank failure over the past 19 months has run higher than during the savings-and-loan debacle. That's partly due to smaller banks having higher resolution costs than larger ones, and because the steep decline in home prices that set off the current distress wasn't a factor in the earlier crisis, said Jim Wigand, deputy director of resolutions and receiverships at the FDIC.
Because of the tumble in prices, the loss rates on home loans and construction and development loans were higher for banks, with "a domino effect" on related securities, Wigand said.
Many of the smaller banks that failed in the recent run shared common attributes: rapid growth, heavy concentration of brokered deposits sold by securities firms to customers outside the bank's local area, and heavy lending in "hot markets" like Arizona, California, Florida and Nevada, noted Bert Ely, a banking consultant based in Alexandria, Va.
They are spread nationwide, though there is a concentration of banks in Georgia: 17 have fallen there since the beginning of last year, more than in any other state. That is a reflection of the local real estate market, whose distress has rippled throughout the economy there.
In Friday's other three closings, Stearns Bank, based in St. Cloud, Minn., agreed to buy the assets and deposits of ebank. United Bank, based in Zebulon, Ga., is assuming the deposits and $155 million of the assets of First Coweta; the FDIC will retain the rest for eventual sale. IberiaBank, based in Lafayette, La., is assuming the deposits and $589 million of the assets of CapitalSouth Bank.
Those failures are expected to cost the insurance fund an estimated $63 million for ebank, $48 million for First Coweta and $151 million for CapitalSouth Bank.
Last spring, the FDIC adopted a new system of special fees paid by U.S. banks and thrifts that shifted more of the burden to bigger institutions to help replenish the insurance fund.
The number of troubled banks on the agency's confidential list leaped to 305 in the first quarter, the highest number since 1994. Some analysts expect hundreds of banks to collapse over the next year or so.
Around 2,900 banks failed during the S&L crisis from 1980 through 1994.
