The number of bank failures in the US has continued to increase with a staggering 123 entities going out of business so far this year, despite the economy witnessing some signs of recovery.
The authorities shut down three banks – Orion Bank based in Naples, Pacific Coast National Bank in San Clemente and Century Bank FSB of Sarasota on November 13, taking the count of failed banks to 123 this year.
The Federal Deposit Insurance Corp (FDIC), which was named the receiver of the failed banks, took over Orion Bank, with about $2.7 billion in assets and $2.1 billion in deposits and Century Bank with $728 million in assets and $631 million in deposits.
Meanwhile, Pacific Coast National Bank was also shut down. It had $134.4 million in assets and $130.9 million in deposits.
In addition, FDIC had entered into a purchase and assumption agreement with Iberia Bank of Lafayette, Louisiana, to assume all of the deposits of Century Bank, FSB.
However, the maximum number of collapses this year took place in July, when 24 banks were closed down, while 20 entities bite the dust last month.
Despite the slowly improving economic situation, soaring unemployment rate have resulted in rising defaults, primarily impacting the small and medium banks.
Banks are failing at the fastest pace in 17 years even as the economy grew for the first time in one year at 3.5 per cent in the September quarter.
Estimates show that bank collapses this year have made the FDIC poorer by about $25 billion and the agency has projected such costs to reach $100 billion by 2013.
So far in November, eight banks have been collapsed, while in the last week of October, nine banks were shut down on the same day costing the FDIC nearly $2.5 billion.
Faced with increasing failures, the FDIC has proposed the banks to pre-pay their premiums, which would boost the federal agency's insurance fund by $45 billion.
After the Wall Street giant Lehman Brothers collapsed in September last year, which pushed the financial system into a tizzy, 135 US banks have gone out of business.
Partners Bank, Jennings State Bank, Warren Bank, Flagship National Bank, Community Bank of Lemont, Pacific National Bank, Georgian Bank and Irwin Union Bank, are among the entities which collapsed this year.