UPDATE 1-Warren Bank in Michigan closed, FDIC says

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WASHINGTON Oct 2 (Reuters) - Bank regulators closed Warren Bank in Michigan on Friday, the 96th U.S. bank to fail this year and the second in that state, as deteriorating loans continued to take their toll on financial institutions.

The Federal Deposit Insurance Corp said Warren had $538 million in total assets and $501 million in total deposits as of July 31, 2009, the latest data available.

The Huntington National Bank in Ohio agreed to assume all deposits of Warren, whose six branches will reopen on Saturday as branches of Huntington.

In addition to assuming all the deposits of Warren, Huntington will also buy about $83 million of the failed bank's assets. The FDIC said it would retain the remaining assets to deal with later.

The failure is expected to cost the FDIC deposit insurance fund an estimated $275 million, the agency said. In 2008, 25 U.S. banks were seized by officials, up from only 3 in 2007.

The insurance fund's balance dipped to $10.4 billion at the end of the second quarter, but that level does not include the additional $32 billion the FDIC has set aside to cover the cost of bank failures over the next year.

During the current financial crisis, Seattle-based lender Washington Mutual became the biggest bank to fail in U.S. history. It was closed in 2008 while suffering from losses from soured mortgages and liquidity problems.

Customers of Warren can access their money over the weekend by check, teller machine or debit card, the FDIC said. The agency will insure up to $250,000 per account.

The FDIC also has a running tally of problem banks that its examiners closely monitor. At the end of the second quarter, 416 undisclosed institutions were on that list. (Reporting by Jeremy Pelofsky; editing by Andre Grenon)