In the latest sign of the lasting effects of the financial crisis, federal regulators today closed down the 100th bank this year.
The Office of Thrift Supervision Friday afternoon shut down Partners Bank of Naples, Florida.
The Federal Deposit Insurance Corporation was appointed as the bank's receiver and the FDIC then entered into an agreement with Stonegate Bank of Fort Lauderdale, Fla., to assume the deposits of Partners Bank. When the two branches of Partners Bank open on Monday, they will be branches of Stonegate Bank. As of Sept. 30, Partners Bank had assets worth $65.5 million, the FDIC said, and total deposits of approximately $64.9 million.
Shortly after closing Partners Bank, federal regulators also shuttered American United Bank in Lawrenceville, Ga., the 101st bank to collapse this year.
The Hillcrest Bank, another financial institution in Naples, Fla. has closed as well as the Flagship National Bank, Bradenton, Fla.
The Bank of Elmwood, Racine, Wisconsin, Riverview Community Bank, Otsego, Minnesota and First Dupage Bank, Westmont, Illinois also failed late Friday evening.
Last week, regulators closed San Joaquin Bank in Bakersfield, Calif., the 99th bank to fail.
In all of 2008, federal regulators only shut down 25 banks. This year has already seen four times as many banks go down. Thus far banks have collapsed at an average of about 10 per month.
FDIC chief Sheila Bair today attempted to ease the concerns of bank customers.
"I want to take this opportunity to reassure consumers that their insured deposits are absolutely safe," she said in a video posted on YouTube.
The FDIC provides basic insurance of up to $250,000 per depositor, per insured bank.
"Throughout the FDIC's 75-year history, no insured depositor has ever lost a penny of insured deposits and none ever will," she said.
Despite the rising tide of bank failures, it is extremely unlikely that 2009 will set the record for most collapses in one year. That was set in 1992 when 181 banks went down, the most since the Great Depression.
"Some banks continue to face serious challenges, but the overwhelming majority will weather this economic storm," Bair said. "There are many signs that our economy is recovering and as the economy heals so will the banking system. Until the healing process is complete, there will be more bank failures, however the number of bank failures we are experiencing is significantly lower than those the FDIC has handled during past crises."
While 2009 has had its share of major bank meltdowns, there have been no collapses this year as big as last year's failures of IndyMac and Washington Mutual. The largest failure so far in 2009 was Colonial BancGroup of Montgomery, Ala., which collapsed in August with about $25 billion in assets.
The rising number of bank failures has taken a severe toll on the government-backed FDIC, which insures bank deposits up to $250,000 and was set up after the raft of bank failures in the 1930s. As of the end of June, the agency's insurance fund for depositors had dwindled to $10.4 billion, the lowest level in 15 years, and agency officials said the fund balance turned negative in late September.
The FDIC currently has 416 financial institutions on its "problem list," the highest number since June 1994. The agency now expects bank failures to cost the fund $100 billion over the next four years, with the bulk of the costs coming this year and next.
Bank Failure Culprit: Real Estate Loans
Failed real estate loans are the chief culprit for current bank failures. FDIC chief Sheila Bair reiterated at a Senate hearing last week that increasing losses on soured commercial real estate loans remain the biggest challenge for banks these days.
To bolster its dwindling fund, the FDIC last month proposed that banks pay three years worth of fees in advance, a move that could rake in $45 billion.
Despite the agency's dwindling insurance fund, Bair has consistently emphasized that FDIC-insured bank deposits are safe. The agency also has tens of billions in additional loss reserves that can be used if necessary, as well as a $500 billion credit line with the Treasury Department.
"We cannot run out of money," Bair said today.