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WASHINGTON — Regulators on Friday closed banks in Virginia and California, lifting to 73 the number of U.S. bank failures this year.
The number of closures has dropped significantly this year as banks have worked their way through the bad debt accumulated in the recession. By this time last year, regulators had shuttered 127 banks.
The Federal Deposit Insurance Corp. seized Bank of the Commonwealth, based in Norfolk, Va., with $985.1 million in assets and $901.8 million in deposits, and Citizens Bank of Northern California, based in Nevada City, Calif., with $288.8 million in assets and $253.1 million in deposits.
Southern Bank and Trust Co., based in Mount Olive, N.C., agreed to assume all the deposits and about $924.3 million of the assets of Bank of the Commonwealth. Tri Counties Bank, based in Chico, Calif., is acquiring the assets and deposits of Citizens Bank of Northern California.
In addition, the FDIC and Southern Bank and Trust agreed to share losses on $798.2 million of Bank of the Commonwealth's loans and other assets.
The failure of Bank of the Commonwealth is expected to cost the deposit insurance fund $268.3 million. That of Citizens Bank of Northern California is expected to cost $37.2 million.
California has been one of the hardest-hit states for bank failures amid an avalanche of bad loans — especially for commercial real estate. Regulators shuttered 12 lenders in California last year. Citizens Bank of Northern California was the fourth bank to fail in the state this year.
Florida, Georgia and Illinois also have seen large numbers of bank failures.
In all of 2010, regulators seized 157 banks, the most in any year since the savings-and-loan crisis two decades ago. Those failures cost around $21 billion. The FDIC has said 2010 likely was the high-water mark for bank failures from the Great Recession.
In 2009, there were 140 bank failures that cost the insurance fund about $36 billion, a higher price tag than in 2010 because the banks involved were bigger on average. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three were closed in 2007.
From 2008 through 2010, bank failures cost the fund $76.8 billion. The deposit insurance fund fell into the red in 2009. With failures slowing, the FDIC's fund balance turned positive in the second quarter of this year; it stood at $3.9 billion as of June 30.
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 2010.
