130 US banks bite the dust this financial year



Small banks are expected to continue to fail at an elevated pace through next year. The Federal Deposit Insurance Corp, which protects bank accounts, has said the banking industry’s recovery will lag behind the general economy.
The economy showed some signs of brightening on Friday as a report showed US employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began.

The FDIC said regulators on Friday closed three banks in Georgia, bringing the number of bank failures in that state this year to 24, and one each in Virginia, Illinois and Ohio.
The biggest bank to close on Friday was AmTrust Bank of Cleveland, Ohio, which had assets of US$12 billion and deposits of  US$8 billion. The New York Community Bank of Westbury, New York, assumed its deposits.
The other five banks had assets of less than US$1 billion. They are Benchmark Bank of Illinois, Greater Atlantic Bank of Virginia and the three banks in Georgia — Tattnall Bank, Buckhead Community Bank, and First Security National Bank.
The six failures are expected to cost the FDIC’s insurance fund a total of more than US$2.3 billion.

Banks are collapsing at the highest annual level since 1992. Last year 25 banks failed, compared to just three in 2007.
At the beginning of the crisis, institutions were being brought down by soured mortgage-backed securities and bad home loans. Increasingly, small banks’ woes are tied to commercial real estate loans that have taken longer to unravel.
Small institutions have a disproportionately large exposure to commercial real estate because it was an area in which they could effectively compete with larger banks during the credit boom.

The FDIC has said it expects bank failures to cost its insurance fund about US$100 billion from 2009 through 2013.
The agency has ordered banks to prepay three years of industry assessments, or about US$45 billion, to give the FDIC cash to handle the failures.

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