Reg­u­la­tors close banks in Michi­gan, Penn­syl­va­nia

The Pak Banker - - Front Page -

WA S H I N G T O N : Reg­u­la­tors shut down small banks in Michi­gan and Penn­syl­va­nia, boost­ing the num­ber of U.S. banks that have failed this year to 151 as bad loans have mounted and the econ­omy has been slow to heal.

The Fed­eral De­posit In­surance Corp. took over Para­mount Bank, based in Farm­ing­ton Hills, Mich., with $252.7 mil­lion in as­sets and $213.6 mil­lion in de­posits; and Earth­star Bank, based in Southamp­ton, Pa., with $112.6 mil­lion in as­sets and $104.5 mil­lion in de­posits.

Level One Bank, based in Farm­ing­ton Hills, Mich., will as­sume the as­sets and de­posits of Para­mount Bank; Polo­nia Bank, based in Hunt­ing­don Val­ley, Pa., is as­sum­ing all the de­posits and $77.1 mil­lion of Earth­star Bank's loans and other as­sets.

In ad­di­tion, the FDIC and Level One Bank agreed to share losses on $233.1 mil­lion of Para­mount Bank's as­sets. The agency and Polo­nia Bank are shar­ing losses on $45.8 mil­lion of Earth­star Bank's as­sets.

The fail­ure of Para­mount Bank is ex­pected to cost the de­posit in­surance fund $90.2 mil­lion; that of Earth­star Bank is ex­pected to cost $22.9 mil­lion. The 151 clo­sures na­tion­wide so far this year tops the 140 shut­tered in all of 2009 and is the most in a year since the sav­ings-and-loan cri­sis two decades ago. By this time last year, reg­u­la­tors had closed 133 banks.

The 2009 fail­ures cost the in­surance fund about $36 bil­lion; the fail­ures so far this year have cost around $21 bil­lion, less be­cause the banks fail­ing in 2010 have on av­er­age been smaller. Twenty-five banks failed in 2008, the year the fi­nan­cial cri­sis struck with force; only three suc­cumbed in 2007. The grow­ing bank fail­ures have sapped bil­lions of dol­lars out of the de­posit in­surance fund. It fell into the red last year, and its deficit stood at $8 bil­lion as of Sept. 30.

The num­ber of banks on the FDIC's con­fi­den­tial "prob­lem" list jumped to 860 in the third quar­ter from 829 three months ear­lier, even as the in­dus­try as a whole made $14.5 bil­lion in net in­come. -PB News

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