Regulators shut banks in Maryland, Minnesota; 83 failures this year

WASHINGTON -- Regulators on Friday shut down small banks in Maryland and Minnesota, pushing to 83 the number of bank failures this year amid the soured economy and rising loan defaults.

The Federal Deposit Insurance Corp. took over Baltimore-based Bradford Bank, with about $452 million in assets and $383 million in deposits. It also seized Mainstreet Bank, based in Forest Lake, Minn., with assets of $459 million and deposits of $434 million.

Manufacturers and Traders Trust, based in Buffalo, N.Y., has agreed to assume the deposits and assets of Bradford Bank. The nine branches of Bradford Bank will reopen Saturday as offices of M&T.

Central Bank, based in Stillwater, Minn., is assuming the deposits and assets of Mainstreet Bank, whose eight branches will reopen Saturday as offices of Central Bank.

In addition, the FDIC agreed to share with M&T losses on about $338 million of Bradford Bank's loans and other assets, and struck a similar agreement with Central Bank for around $268 million of Mainstreet Bank's.

The failure of Bradford Bank is expected to cost the deposit insurance fund an estimated $97 million; that of Mainstreet Bank about $95 million, the FDIC said.

Hundreds more banks are expected to fail in the next few years largely because of souring loans for commercial real estate. The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end of June from 305 in the first quarter. That's the highest number since June 1994, during the savings-and-loan crisis.

Last week, Guaranty Bank became the second-largest U.S. bank to fail this year after the big Texas lender was shut down and most of its operations sold at a loss of billions of dollars for the government to a major Spanish bank. The failure, the 10th-largest in U.S. history, is expected to cost the insurance fund an estimated $3 billion.

The sale of most of Austin-based Guaranty's operations to the U.S. division of Banco Bilbao Vizcaya Argentaria, Spain's No. 2 bank, market the first time a foreign bank has bought a failed American bank during the current financial crisis.