UPDATE 1-FDIC says Minnesota bank closed, second of day

(Adds details of accounts, background)

WASHINGTON Oct 2 (Reuters) - Bank regulators closed Jennings State Bank in Minnesota on Friday, the 97th U.S. bank to fail this year and the second of the day as the financial crisis continues to take its toll on institutions.

The Federal Deposit Insurance Corp said Jennings had $56.3 million in assets and $52.4 million in deposits.

Central Bank in Minnesota agreed to assume all deposits of Jennings, whose two branches will reopen on Saturday as branches of Central Bank, the agency said.

Central Bank agreed to acquire essentially all the assets of Jennings, according to the FDIC. The failure is expected to cost the FDIC deposit insurance fund an estimated $11.7 million and is the fourth in Minnesota this year, the agency said.

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 that the FDIC has set aside to cover the cost of bank failures over the next year.

In 2008, 25 U.S. banks were seized by officials, up from only three in 2007.

Customers of Jennings can continue to access their money by check, teller machine or debit card, the FDIC said.

The FDIC insures up to $250,000 per account.

The agency also has running a tally of problem banks that its examiners closely monitor. At the end of the second quarter, 416 undisclosed institutions were on that list.

FDIC Chairman Sheila Bair has said bank failures will remain elevated, even as the economy begins to recover, because the bank industry is continuing to recognize loan losses and clean up their balance sheets. She said the industry's woes are migrating from residential loans and complex securities to more conventional types of retail and commercial loans that have been hit hard by the recession.

(Reporting by Jeremy Pelofsky; Editing by Richard Chang)