Regulators Close Ga. Bank; 95th US Failure in '09

Regulators on Friday shut down Atlanta-based Georgian Bank, the 95th U.S. bank to fail this year as loan defaults rise in the worst financial climate in decades.

In coming months, more banks are expected to buckle under the weight of commercial real estate and other loans that go sour. Those failures could imperil the insurance fund for deposits, already at the lowest point in nearly 20 years.

The Federal Deposit Insurance Corp. took over Georgian Bank, with about $2 billion in assets and $2 billion in deposits as of July 24. First Citizens Bank and Trust Co., based in Columbia, S.C., agreed to assume the assets and deposits of the failed bank. Georgian Bank's five branches will reopen Monday as offices of First Citizens Bank.

In addition, the FDIC and First Citizens Bank agreed to share losses on Georgian Bank's roughly $2 billion in loans and other assets.

The failure of Georgian Bank is expected to cost the federal deposit insurance fund an estimated $892 million. The fund has been so diminished by the wave of collapsing banks that some analysts have warned it could sink into the red by year's end.

The fund fell 20 percent to $10.4 billion at the end of June. That's its lowest point since 1992, at the height of the savings-and-loan crisis. The FDIC estimates bank failures will cost the fund around $70 billion through 2013.

FDIC Chairman Sheila Bair said last week she is "considering all options, including borrowing from Treasury," to replenish the insurance fund. The FDIC is weighing several costly, and never before used, options for shoring up the fund: borrowing billions of dollars from healthy banks, imposing a special fee on the banking industry or tapping the agency's $500 billion credit line with the Treasury.

Another option would be for banks to pay their normal insurance fees in advance. But U.S. Comptroller of the Currency John Dugan said Thursday he was "very concerned" about the effect of such an upfront levy on the strained banking industry.