January 22, 2011 / 1:25 AM / 8 years ago

U.S. closes four banks, biggest is in Denver

WASHINGTON (Reuters) - U.S. authorities closed four banks — one in Denver and three in the U.S. Southeast — on Friday with total assets of $2.7 billion, bringing the number of failures in 2011 so far to seven.

The pace of bank failures is expected to decrease in 2011 as the economy recovers and the impact of the 2007-2009 financial crisis fades. In 2010, 157 banks failed, following 140 failures in 2009.

FDIC Chairman Sheila Bair has said the agency expects the number of failures to drop in 2011.

“You will still have elevated bank failures in 2011 but based on our current projections it will be significantly lower than what we had last year,” she said on January 13.

Smaller banks, those with less than a billion dollars in assets, continue to struggle and have made up the bulk of recent closures. Many are having trouble dealing with the sluggish real estate market, particularly its effect on loans they made for commercial property.

The FDIC announced the following closures on Friday:

* United Western Bank (UWB.BO), of Denver. It had assets of $2.05 billion. First Citizens Bank & Trust Company (FCNCA.O), of Raleigh, North Carolina, will assume the deposits. United Western Bank had eight branches, including in Boulder and Fort Collins.

First Citizens already had three branches in the Denver area operated by its IronStone Bank division. First Citizens has purchased assets of four other banks, in Florida, California and Washington state, in the past 18 months.

* CommunitySouth Bank and Trust, of Easley, South Carolina. Had $440.6 million in assets. CertusBank, National Association, of Easley, South Carolina, a newly-chartered bank subsidiary of Blue Ridge Holdings Inc, Charlotte, North Carolina, assumed the deposits.

* Bank of Asheville, North Carolina. It had assets of $195.1 million. First Bank, Troy, North Carolina, to assume the deposits.

* Enterprise Banking Company, of McDonough, Georgia. It had assets of $100.9 million. FDIC created Deposit Insurance National Bank of McDonough, which will remain open until January 28, to allow depositors access to insured deposits and time to open accounts elsewhere.

On November 23 the FDIC released its latest quarterly report on the state of the banking industry. It showed that the industry overall continues to recover from the financial crisis but that large banks are doing better than smaller institutions.

The net income for the banking industry was $14.5 billion for the third quarter, which compares to $21.4 billion in the second quarter and $2 billion in the third quarter of 2009, according to the FDIC.

The agency said that third-quarter earnings would have reached a three-year high had it not been for a $10.4 billion goodwill charge taken by Bank of America (BAC.N) during the quarter for its card business.

The banking industry has been setting aside less money to guard against losses, helping to boost earnings in recent quarters.

Bair has cautioned against banks reducing these reserves too quickly given the state of the economy.

Despite the improving revenue numbers for the industry as a whole, community banks continue to be hit hard by the weak economy and the amount of bad loans on their books, particularly in the commercial real estate sector.

For instance, the number of banks on the agency’s “problem list” grew to 860 from 829, to reach the highest number since March of 1993 when there were 928 institutions on the list. Most of these institutions will not fail but the list provides an indication of how many banks are struggling.

Reporting by Charles Abbott; Editing by Tim Dobbyn, Bernard Orr

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