Calif. bank becomes 99th in US to be shut in 2009

Regulators have shut down San Joaquin Bank in California, marking the 99th failure this year of a federally insured bank.

The Federal Deposit Insurance Corp. was appointed receiver of San Joaquin Bank, based in Bakersfield, Calif. It had $775 million in assets and $631 million in deposits as of Sept. 29.

The FDIC said Friday the bank's deposits will be assumed by Citizens Business Bank, based in Ontario, Calif. Its five branches will reopen Monday as branches of Citizens Business Bank.

San Joaquin Bank's failure is expected to cost the FDIC's insurance fund $103 million.

Depositors' money is not in danger. The FDIC is backed by the government, and deposits are guaranteed up to $250,000 per account. But the deposit insurance fund has fallen into the red. The FDIC board recently proposed to have U.S. banks prepay about $45 billion of their insurance premiums - three years' worth.

That plan isn't a long-term remedy for the depleted fund. But it would spare ailing banks the immediate cost of an alternative idea: paying an emergency fee for the second time this year. And the FDIC still has billions in loss reserves apart from the insurance fund.

The 99 bank failures this year compare with 25 last year and three in 2007. It's the highest number in a year since 1992 during the savings-and-loan crisis, when 120 institutions collapsed. Closures peaked during that crisis in 1989, when 534 banks were shuttered.

The most severe financial crisis since the 1930s has hit banks large and small. With unemployment rising, consumer spending slack and businesses shuttered, experts say up to 400 more banks could fail in the next couple of years.

The 99 failures may not fully reflect the depth of banks' travails. Many more banks - perhaps hundreds - are so weak they could have been shut down already, experts say. Many vulnerable banks are in limbo. Regulators have threatened to close them unless they shore up their balance sheets, but the recession has made it difficult to raise capital or sell assets.

The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end of June from 305 in the first quarter. That's the most since June 1994. About 13 percent of banks on the list generally end up failing, according to the FDIC.

Banks have been especially hurt by failed real estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.

Many of the banks that have failed since the pace accelerated late last year have been small community banks, with less than $1 billion in assets. Failures have been especially concentrated in Georgia, California and Illinois.

Many smaller banks were felled by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment. These loans contrasted with the complex securities favored by Wall Street investment banks that triggered the financial meltdown and global economic crisis.

But some of the failures, both this year and last, have been huge institutions. Seattle-based thrift Washington Mutual Inc. fell in September 2008 with about $307 billion in assets, the largest U.S. bank failure ever. JPMorgan Chase & Co. acquired it for $1.9 billion in a deal brokered by the FDIC.

California lender IndyMac Bank, shut down in July 2008, was the costliest failure for the insurance fund - an estimated $10.7 billion loss.

In August, Montgomery, Ala.-based Colonial Bank, a lender in real estate development, became the biggest U.S. bank to fail this year and the sixth-largest in U.S. history, with about $25 billion in assets. It's expected to cost the fund about $2.8 billion.