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Authorities close First Priority Bank

First Priority Bank with six branches on Florida’s Gulf Coast was closed by state regulators, becoming the eighth US bank to collapse this year amid failed loans and writedowns linked to a slump in home prices.

First Priority, with US$259 million in assets, was shut on Friday by the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corp (FDIC) sold US$227 million in deposits to SunTrust Banks Inc of Atlanta, the agency said in a statement. Six First Priority branches in Bradenton, Sarasota and Venice will open tomorrow as SunTrust offices, the FDIC said.

The pace of bank closings is accelerating as securities firms report more than US$480 billion in writedowns and credit losses since last year, when three banks were shuttered. Regulators last month closed IndyMac Bancorp, a California-based mortgage lender with US$32 billion in assets, the third-largest bank seizure that will cost the US deposit insurance fund US$4 billion to US$8 billion.

“The only thing sure other than death and taxes is that deposit insurance premiums will be going up as more banks fail,” said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine.

He expects 300 US banks to fail in the next several years, mainly because of mounting losses from real estate-related loans.

SunTrust, the largest bank based in Georgia, will buy Bradenton-based First Priority’s deposits held for 4,000 customers for no premium, while acquiring about US$42 million in assets, the FDIC said.

The US deposit insurance fund will pay an estimated US$72 million, the FDIC said. First Priority had about US$13 million in uninsured deposits in 840 accounts, although the total may be revised, the FDIC said.

“We are pleased to be in a position to support the FDIC in its effort to resolve a problematic situation,” SunTrust Chief Executive Officer James Wells said in a statement.

SunTrust will seek jobs for 50 employees of First Priority, the bank said.

The FDIC insures deposits of up to US$100,000 per depositor per bank, and up to US$250,000 for some retirement accounts at 8,494 institutions with US$13.4 trillion in assets.

Homeowners who defaulted in June outnumbered those who caught up on payments as Bank of America Corp, Wells Fargo & Co and other lenders sought to modify the loans, the Mortgage Insurance Companies of America reported on July 31. The pace of foreclosures more than doubled in the second quarter from a year earlier, RealtyTrac Inc said last month.

Lenders on the FDIC’s “problem list” climbed to 90 in the first quarter from 76 in the fourth quarter of last year, the agency said in May. FDIC Chairman Sheila Bair said 13 percent of listed banks may fail, while the remainder are nursed back to health or are sold off to healthier lenders.

Bair and Comptroller of the Currency John Dugan said on July 28 they expected more lenders to fail this year as the pace of shutdowns returns to more normal levels.

The FDIC has closed 36 banks since October 2000, a list on the FDIC Web site shows. The US shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.

First Priority is the first Florida bank to fail since Guaranty National Bank in Tallahassee in March 2004, the FDIC said.

US bank regulators closed Reno-based First National Bank of Nevada and Newport Beach, California-based First Heritage Bank last month; Staples, Minnesota-based First Integrity Bank and ANB Financial in Bentonville, Arkansas, in May; Hume Bank in Hume, Missouri, in March; and Douglass National Bank in Kansas City, Missouri, in January. The six lenders had about US$5.89 billion in assets.
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