4 Banks Fail in Md., Calif., Wash. State

Bank closings, FDIC, federal deposit insurance corporation, banking, AP

Regulators shut down four banks Friday, bringing the total of 2010 failures to 143. That tops the 140 shuttered last year and is the most in a year since the savings-and-loan crisis two decades ago.

The Federal Deposit Insurance Corp. took over K Bank, based in Randallstown, Md., with $538.3 million in assets, and Pierce Commercial Bank, based in Tacoma, Wash., with $221.1 million in assets. The FDIC also seized two California banks: Western Commercial Bank in Woodland Hills, with $98.6 million in assets, and First Vietnamese American Bank in Westminster, with assets of $48 million.

M&T Bank, based in Buffalo, N.Y., agreed to assume the deposits and $410.8 million of the assets of K Bank. First California Bank, based in Westlake Village, Calif., is acquiring the assets and deposits of Western Commercial Bank. Heritage Bank, based in Olympia, Wash., is taking the assets and deposits of Pierce Commercial Bank, while Los Angeles-based Grandpoint Bank is assuming the assets and deposits of First Vietnamese American Bank.

In addition, the FDIC and M&T Bank agreed to share losses on $289 million of K Bank's loans and other assets. The FDIC and First California Bank are sharing losses on $83.9 million of Western Commercial Bank's assets.

The failure of K Bank is expected to cost the deposit insurance fund $198.4 million. That of Western Commercial Bank is expected to cost $25.2 million; Pierce Commercial Bank, $21.3 million, and First Vietnamese American Bank, $9.6 million.

Like the four banks, the banks that have failed this year are smaller, on average, than those that succumbed in 2009. That has meant the deposit insurance fund has suffered a milder loss, which has reached about $21 billion so far this year, compared with $36 billion in 2009.

Still, banks, especially small community institutions, are falling as soured loans have mounted and the economy has sputtered. The wave of closings points to the lingering power of the recession more than a year after its official end.

Florida, Georgia, Illinois and California have each seen bank failures in the double digits this year. Some communities in those states are still reeling from the financial meltdown that brought an avalanche of bad loans, especially for commercial real estate.

The shutdowns Friday of Western Commercial Bank and First Vietnamese American Bank brought to 12 the number of bank failures in California this year.

The closures nationwide have compounded the problems in areas already straining under high unemployment, foreclosed homes and vacant malls and office buildings.

Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

The 2009 total of bank failures had been the highest annual toll since 1992, at the height of the savings and loan crisis. 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 FDIC's deposit insurance fund. It fell into the red last year, and its deficit stood at $15.2 billion as of June 30.

The number of banks on the FDIC's confidential "problem" list jumped to 829 in the second quarter from 775 three months earlier, even as the industry as a whole had its best quarter since 2007, making $21.6 billion in net income. Banks with more than $10 billion in assets - only 1.3 percent of the industry - accounted for $19.9 billion of the total earnings.

The FDIC expects the cost of resolving failed banks to total around $52 billion from 2010 through 2014.

Depositors' money - insured up to $250,000 per account - is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted in July.
By AP Business Writer Marcy Gordon
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