Small Georgia bank closed

WASHINGTON -- Regulators on Friday shut United Security Bank, a small bank in Georgia, bringing the number of bank failures this year to 116 amid the struggling economy and a cascade of defaults on loans.

The Federal Deposit Insurance Corp. took over United Security Bank, based in Sparta, with $157 million in assets and $150 million in deposits and two branches. Ameris Bank, based in Moultrie, Ga., agreed to assume the assets and deposits of the failed bank.

The failure of USB is expected to cost the federal deposit insurance fund an estimated $58 million.

With USB, 21 Georgia banks have failed this year, more than in any other state. Most of the failures have involved banks in the Atlanta area, where the collapse of the real estate market brought economic dislocation. Failures also have been especially concentrated in California and Illinois.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions out of the federal deposit insurance fund. It has fallen into the red.

Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. The FDIC still has billions in loss reserves apart from the insurance fund. It also can tap a Treasury Department credit line of up to $500 billion.

Last week, regulators shut nine banks owned by holding company FBOP Corp. It was a new milestone: nine was the highest number of banks closed in a day since the financial crisis began taking down banks last year. Minneapolis-based US Bancorp bought the deposits and most of the assets of the banks.

No South Carolina banks have failed during this latest wave of FDIC seizures.

Banks have been especially hurt by failed real estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.

If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks, especially, hold large concentrations of these loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.

The 116 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $27 billion this year, and hundreds more bank failures are expected to raise the cost to around $100 billion through 2013.

The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end of June from 305 in the first quarter. That's the most since June 1994.

To replenish the fund, the FDIC wants the roughly 8,100 insured banks and savings institutions to pay in advance about $45 billion in premiums that would have been due over the next three years.