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Bank closures in 4 US states drain deposit insurance fund

BANKS in four American states with more than US$1 billion in assets were closed in a single day, boosting the toll of seized lenders to 13 this year and further draining a deposit insurance fund amid record home foreclosures.

Florida, Nebraska, Illinois and Oregon regulators took over the banks on Friday and, with the Federal Deposit Insurance Corp, sold US$807.5 million in deposits and arranged to open the branches under new names tomorrow. The FDIC said that the shutdowns, the most on one day since 1992, will cost the agency US$341.6 million.

Florida's Riverside Bank of the Gulf Coast in Cape Coral, Nebraska's Sherman County Bank in Loup City, Illinois's Corn Belt Bank and Trust Co of Pittsfield and Oregon's Pinnacle Bank of Beaverton were shut. TIB Bank of Naples bought Riverside's US$424 million of deposits, the FDIC said. Heritage Bank of Wood River got Sherman County's US$85.1 million of deposits, Carlinville National Bank gained Corn Belt's US$234.4 million deposits and Washington Trust Bank of Spokane got Pinnacle's US$64 million, Bloomberg News reported.

Interest-rate cuts

Regulators have now seized 13 banks, and seven so far in February - the most for a month since 1993. State and federal agencies shuttered 25 banks last year, matching the total for 2001-2007, as home foreclosures soared and bank profits tumbled. The FDIC has doubled premiums it charges banks to replenish its reserves, which had US$34.6 billion as of the third quarter.

The Obama administration is seeking to jolt the economy with a bank rescue using US$350 billion from the Troubled Asset Relief Program, a US$787-billion stimulus package and a plan to stem foreclosures. The housing plan involves the United States subsidizing as much as US$50 billion for interest-rate cuts to help borrowers avoid losing their homes, said a person briefed on the proposal.

Nebraska Banking Commissioner John Munn said Sherman County Bank, which had four offices in central Nebraska, became the first state lender shut in two decades because of losses stemming from commodity trading by about 30 of its farm customers.

"This closing is not indicative of the general condition of our Nebraska banks," Munn said, according to the Omaha World Herald. "I do not believe this is the tip of an iceberg."

Heritage Bank is paying a 6.5-percent premium for Sherman County's deposits, the FDIC said.

Riverside Gulf Coast Banking Co, parent of the Florida bank, in late October agreed with regulators to strengthen management and lending practices within 60 days. The Federal Reserve said that Riverside would hire a consultant to write a management plan with qualified personnel and raise additional capital for the bank.


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