US regulators closed three small banks on Friday, bringing the number of bank failures to 40 so far this year as the recession and delinquent loans erode the health of financial institutions.
The largest of the banks closed on Friday was Cooperative Bank of Wilmington, North Carolina, with US$970 million in assets and US$774 million in deposits, the Federal Deposit Insurance Corp (FDIC) said.
The failure is expected to cost the FDIC an estimated US$217 million.
First Bank of Troy, North Carolina, will purchase all the deposits, except about US$57 million in brokered deposits. The FDIC said it will pay the brokers directly.
Cooperative Bank’s 24 branches will reopen tomorrow as branches of First Bank.
The FDIC also announced the failure of Southern Community Bank of Fayetteville, Georgia, which had US$377 million in assets and US$307 million in deposits. In Kansas, the FDIC said regulators closed First National Bank of Anthony, with US$156.9 million in assets and US$142.5 million in deposits.
The pace of bank failures has accelerated this year as the 18-month-old recession continues. There were 25 failures in all of last year and just three in 2007.
Seattle-based Washington Mutual became the biggest bank to fail in US history when it was seized in September with US$307 billion in assets. JPMorgan Chase & Co acquired the assets of Washington Mutual.
As many as 1,000 US banks could fail in the next three to five years on losses related to commercial real estate loans, RBC Capital Markets analysts said in February. The FDIC estimates US bank failures through 2013 may cost US$70 billion.
The FDIC classified 305 banks as “problem” institutions in the first quarter, a 21 percent jump from the fourth quarter and the highest since 1993, the agency said on May 27. The agency doesn’t identify problem lenders.
Regulators this year have closed the most banks since 1993, as the loss of jobs contributes to mounting home foreclosures and loan delinquencies.
The US economy contracted at a 5.7 percent annual pace in the first quarter. More than a quarter of all states have unemployment rates higher than 10 percent, the Labor Department said on Friday.
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