Regulators close two more banks; 55 failures so far this year

WASHINGTON -- Regulators on Friday shut down small banks in Georgia and South Dakota, boosting to 55 the number of federally insured banks to fail this year.

The Federal Deposit Insurance Corp. was appointed receiver of the two banks: First Piedmont Bank, based in Winder, Ga., which had about $115 million in assets and $109 million in deposits as of July 6; and BankFirst, based in Sioux Falls, S.D., with around $275 million in assets and $254 million in deposits as of April 30.

The FDIC said all of First Piedmont's deposits will be assumed by First American Bank and Trust of Athens, Ga., which also agreed to buy about $111 million of its assets. Alerus Financial, based in Grand Forks, N.D., agreed to assume all of the deposits of BankFirst as well as $72 million in assets.

First Piedmont's two offices will reopen Monday as First American branches.

BankFirst's two offices also will reopen Monday. Alerus will operate the Sioux Falls office as a branch of First Dakota National Bank of Yankton, S.D. BankFirst's office in Minneapolis will be operated as a branch of Alerus.

With First Piedmont, 15 Georgia banks have failed since the beginning of 2008, more than in any other state. Most of the failures have involved banks in the Atlanta area, where the collapse of the real estate market brought economic dislocation.

Until Friday, however, no federally insured bank had been closed in South Dakota since 1992, when First Federal Savings Bank of South Dakota, based in Rapid City, was shut down during the savings and loan crisis.

The 55 bank failures nationwide this year compare with 25 last year and three in 2007.

The FDIC estimates that the cost to the deposit insurance fund from the failure of First Piedmont Bank will be $29 million. The cost to the fund from BankFirst's failure is estimated at $91 million.

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.