Regulators shut small Georgia bank; 3rd this year

[January 15, 2011]  WASHINGTON (AP) -- Regulators on Friday shut down a small bank in Georgia, the third closure of 2011 following last year's toll of 157 banks brought down by the weak economy and soured loans.

The Federal Deposit Insurance Corp. took over Oglethorpe Bank of Brunswick, Ga., with $230.6 million in assets and $212.7 million in deposits. Bank of the Ozarks, based in Little Rock, Ark., agreed to assume the assets and deposits of the failed bank.

In addition, the FDIC and Bank of the Ozarks agreed to share losses on $173.9 million of Oglethorpe Bank's loans and other assets.

It was Bank of the Ozarks' second such acquisition in less than a month. On Dec. 17, it agreed to take over another small Georgia bank, Chestatee State Bank of Dawsonville.

The failure of Oglethorpe Bank is expected to cost the deposit insurance fund $80.4 million.

Georgia has been one of the hardest-hit states for bank failures amid an avalanche of bad loans, especially for commercial real estate. Twenty-one banks were shuttered in the state last year.

Other states that have seen large numbers of bank failures are Florida, 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 of last year 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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