Two more US banks seized

CHARLOTTE: Regulators on Friday shut down two more banks, boosting the number of federally insured bank failures this year to 36.The latest banks seized were Strategic Capital Bank and Citizens National bank, both in Illinois. The Federal Deposit Insurance Corp. will continue to insure regular deposit accounts of up to $250,000 at both banks.The Illinois Department of Financial and Professional Regulation's banking division took over Strategic Capital Bank, based in Champaign, Ill., while the Office of the Comptroller of the Currency took control of Citizens National Bank, based in Macomb, Ill. The FDIC was appointed receiver of both banks.The closures brought this week's total to three, after federal regulators seized struggling Florida thrift BankUnited FSB on Thursday. That closure was expected to cost the FDIC $4.9 billion, representing the second-largest hit to the FDIC's insurance fund since the financial crisis began felling banks last year.The costliest was last year's seizure of California lender IndyMac Bank, on which the bank insurance fund is estimated to have lost $10.7 billion.The closure of Strategic Capital Bank is expected to cost the FDIC $173 million, while Citizen National Bank's closure will cost about $106 million.The FDIC said all of Strategic's deposits will be assumed by Midland States Bank, based in Effingham, Ill.In addition to acquiring the failed bank's deposits, Midland States Bank agreed to purchase about $536 million in assets. The FDIC will retain the rest for eventual sale.Strategic Capital Bank branches will reopen Tuesday as a branch of Midland States Bank. Citizens National Bank will reopen Saturday as branches of Morton Community Bank.Citizens National Bank had $437 million in assets and about $400 million in deposits as of May 13.The FDIC said a majority of the bank's deposits will be assumed by Morton Community Bank, based in Morton, Ill. Morton Community will not assume about $200 million in brokered deposits held by Citizens National. Instead, the FDIC will pay the brokers directly.In addition to acquiring the remaining of Citizens National's deposits, Morton Community Bank agreed to purchase about $240 million in assets. The FDIC also will keep the bank's remaining assets for future sale.Customers of both Strategic Capital Bank and Citizens National Bank can still write checks and use ATM or debit cards, and loan customers should continue to make their payments as usual. The FIDC will continue to insure deposits.Including the two closings Friday, five banks in Illinois have failed this year, with the last being Heritage Community Bank in Glenwood on Feb. 27.The list of bank failures is growing as falling home prices and rising unemployment cause more individuals and businesses to default on their debt. The 36 bank failures this year in the U.S. compare with 25 in 2008 and just three in 2007.As the economy nationwide has soured, amid rising unemployment, tumbling home prices and soaring loan defaults, bank failures have cascaded and sapped billions out of the deposit insurance fund. According to the most recent data available, the fund now stands at its lowest level in nearly a quarter-century — $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.The FDIC expects that bank failures will cost the insurance fund around $65 billion through 2013.The FDIC has planned to impose a new emergency fee on U.S. banks to replenish the fund. Legislation passed by Congress this week boosts the FDIC's authority to borrow from the Treasury Department if needed from $30 billion to $100 billion, allowing the agency to reduce the amount of the insurance fees.The failure of IndyMac, which had $32 billion in assets, was the second-largest last year, trailing only the September collapse of Washington Mutual Inc.Thrifts have been the most troubled regulated institutions during the financial crisis and among the most spectacular failures. By law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn. Seattle-based thrift Washington Mutual was the biggest bank to collapse in U.S. history, with around $307 billion in assets. It was later acquired by JPMorgan Chase & Co. for $1.9 billion.