Regulators shut 5 more banks; 45 failures this year

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While the pounding from losses on home mortgages may be nearing an end, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

The number of banks on the FDIC's list of problem institutions leaped to 305 in the first quarter — the highest number since 1994 during the savings and loan crisis — from 252 in the fourth quarter. The combined assets of those banks rose to $220 billion from $159 billion.

The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013. The agency recently adopted a new system of emergency fees paid by U.S. financial institutions that shifts more of the burden to bigger banks to help replenish the fund.

Congress has more than tripled the amount the FDIC may borrow from the Treasury Department if needed to restore the insurance fund, to $100 billion from $30 billion.

Government "stress tests" of the 19 biggest U.S. banks last month showed that 10 of them had to raise a total of $75 billion in new capital to withstand possible future losses.

A key government effort to ease the credit crisis reached a milestone on June 17 as 10 large banks said they had repaid a total of $68 billion in federal bailout funds.

The Obama administration on Friday established its process for pricing billions of dollars worth of warrants that large banks must repurchase to exit the $700 billion bailout program.

In addition to the $68 billion in bailout funds repaid by the 10 large institutions, another $2 billion has been repaid by smaller banks.

The closing last month of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of big California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.

The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.

Marcy Gordon reported from Washington.

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