Related article: Big California bank fails, has China branches (Reuters)
WASHINGTON — U.S. regulators closed five more banks on Friday, reaching 120 for the year, as souring loans and the lingering effects of last year’s financial crisis continued to weigh on the nation’s financial institutions.
San Francisco-based United Commercial Bank became the fifth and largest bank to be taken over by regulators on Friday evening, as annual failures hit levels not seen since the savings and loan crisis of the early 1990s. There were 25 bank failures in 2008, and three in 2007.
The Federal Deposit Insurance Corp. said in a release that East West Bank of Pasadena, Calif., would take over United Commercial’s roughly $7.5 billion in deposits, as well as $10.2 billion in assets. The deal includes all of United Commercial’s branches in the U.S., a branch in Hong Kong, and a subsidiary headquartered in Shanghai, China.
The agency said that it would continue to protect the bank’s domestic deposits, while Hong Kong deposits would be covered by the Hong Kong Deposit Protection Scheme. U.S. regulators are also working with their counterparts in China on the bank’s operations in that country, the agency said.
The failure is estimated to cost the FDIC’s deposit insurance fund an estimated $1.4 billion. That’s represents a significant hit for the fund, which has come under increasing pressure this year as failure costs have topped the agency’s initial loss projections. Federal regulators are currently considering a proposal that would have U.S. banks pay three years worth of premiums in advance in order to raise $45 billion to provide more liquidity to the fund.
Earlier Friday evening, regulators closed banks in Minnesota, Missouri, Georgia and Michigan. Leading the list was Oakdale, Minn.-based Prosperan Bank, whose $175.6 million in total deposits were acquired by Alerus Financial, followed by United Security Bank of Georgia, which became the 21st bank in that state to fail this year.
Regulators also closed Detroit-based Home Federal Savings Bank, and Gateway Bank of St. Louis.
The four earlier failures are expected to cost the FDIC’s deposit insurance fund an estimated $132.7 million.
BY MICHAEL R. CRITTENDEN
NOVEMBER 6, 2009, 10:04 P.M. ET
Source: The Wall Street Journal