Regulators close banks in Florida, Arizona

[January 08, 2011]  WASHINGTON (AP) -- Regulators on Friday shuttered banks in Florida and Arizona, the first two closures of 2011 after 157 banks succumbed last year to the struggling economy and mounting bad loans.

The Federal Deposit Insurance Corp. took over First Commercial Bank of Florida, based in Orlando, with $598.5 million in assets and $529.6 million in deposits; and Legacy Bank, based in Scottsdale, Ariz., with $150.6 million in assets and $125.9 million in deposits.

First Southern Bank, based in Boca Raton, agreed to assume the assets and deposits of First Commercial Bank of Florida. Enterprise Bank & Trust, based in St. Louis, is assuming the assets and deposits of Legacy Bank.

In addition, the FDIC and First Southern Bank agreed to share losses on $484.3 million of First Commercial Bank of Florida's loans and other assets. The agency and Enterprise Bank & Trust are sharing losses on $119.8 million of Legacy Bank's assets.

The failure of First Commercial Bank of Florida is expected to cost the deposit insurance fund $78 million; that of Legacy Bank is expected to cost $27.9 million.

Florida has been the state hardest hit by bank closures, with 29 failing in the state last year. Other states that have seen large numbers of failures are California and Illinois.

The 157 bank closures nationwide last year topped the 140 shuttered in 2009. It was the most in a year since the savings-and-loan crisis two decades ago.

The 2009 failures cost the insurance fund about $36 billion. The failures last year cost around $21 billion, a lower price tag because the banks that failed in 2010 were on average smaller. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.

The growing number of bank failures has sapped billions of dollars out of the deposit insurance fund. It fell into the red in 2009, 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. The 860 troubled banks is the highest number since 1993, during the savings-and-loan crisis.

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.

[Associated Press; By MARCY GORDON]

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