Small bank in Pennsylvania shut by regulators

Regulators on Friday shut down Dwelling House Savings and Loan Association, a small bank in Pennsylvania, boosting to 73 the number of federally insured banks that have failed this year.

The Federal Deposit Insurance Corp. was appointed receiver of the failed bank, located in Pittsburgh, which had $13.4 million in assets and $13.8 million in deposits as of March 31. PNC Bank, a large institution based in Pittsburgh, has agreed to assume all of Dwelling House's deposits and about $3 million of its assets; the FDIC will retain the rest for eventual sale.

Dwelling House's lone office in Pittsburgh will reopen Monday as a branch of PNC Bank, the FDIC said.

The FDIC estimates that the cost to the deposit insurance fund from the failure of Dwelling House will be $6.8 million.

The 73 bank failures nationwide this year compare with 25 last year and three in 2007.

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 losses on home mortgages may be leveling off, 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 FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.

The May closing 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.

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