Georgia, Texas Banks Shut as Foreclosures Rise; Toll Reaches 25

By Margaret Chadbourn and Alison Vekshin

Dec. 13 (Bloomberg) -- Georgia and Texas banks with $544 million in deposits were shut by state regulators, raising the failure toll to 25 for this year, as mortgage delinquencies and home foreclosures climb in a deepening U.S. recession.

Haven Trust Bank of Duluth, Georgia, was seized yesterday and sold by the Federal Deposit Insurance Corp. to BB&T Corp. of Winston-Salem, North Carolina, which will reopen four offices northeast of Atlanta as branches on Dec. 15, the FDIC said. Sanderson State Bank was shut by Texas regulators and its assets were sold to Pecos County State Bank of Fort Stockton, which will open a single southwest Texas office Dec. 15 as a branch.

The acquisitions by BB&T, the fifth-best performing stock in the KBW Bank Index this year, and Pecos County Bank were “the ‘least costly’ resolution for the FDIC’s deposit insurance fund,” the Washington-based FDIC said in a statement.

Regulators have closed the most banks in 15 years, and the annual total now exceeds the combined toll for the previous six years, with the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. among the biggest in history. The U.S. entered a recession a year ago and President-elect Barack Obama on Dec. 7 said the slump will worsen before a recovery begins.

BB&T will buy about $55 million of Haven’s $572 million in assets and pay $112,000 for the failed bank’s $515 million in deposits, the FDIC said. The agency will retain the remaining assets “for later disposition.” The deposit insurance fund, supported by fees on insured banks, will pay an estimated $200 million, the agency said.

Pecos will buy $3.8 million of about $37 million in Sanderson’s assets and pay a premium of 0.55 percent to assume the failed bank’s $27.9 million in deposits, the FDIC said. The deposit insurance fund will pay $12.5 million, the agency said.

Failures

The U.S. is seeking to avert failures by using $250 billion from a bank-rescue fund to boost lender capital after tighter credit contributed to a freeze in markets. The FDIC and Office of the Comptroller of the Currency in November allowed private- equity firms and other investors to buy assets and deposits of failing lenders, expanding the pool of bidders.

The FDIC on Nov. 25 classified 171 banks as “problem” in the third quarter, a 46 percent jump from the second quarter, and said industry earnings fell 94 percent to $1.73 billion from a the prevision year. The agency doesn’t name “problem” banks.

“We’ve had profound problems in our financial markets that are taking a rising toll on the real economy,” FDIC Chairman Sheila Bair said at a Washington news conference after releasing the report.

U.S. foreclosure filings climbed 28 percent in November from a year earlier and a looming “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said yesterday.

Insurance Premiums

The FDIC oversees 8,384 institutions with $13.6 trillion in assets, and insures deposits of as much as $250,000 per depositor per bank and the same amount for retirement accounts. The agency has proposed doubling premiums charged to banks for coverage to replenish its reserves amid agency forecasts that bank failures through 2013 will cost almost $40 billion.

Washington Mutual, the biggest savings and loan, sold its assets to JPMorgan Chase & Co. Sept. 25 after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp., the sixth-biggest bank, was pushed by regulators to sell itself to Wells Fargo & Co. for $11.7 billion or face collapse.

The Treasury as part of its bank-rescue effort has bought preferred shares in nine banks: Wells Fargo & Co., JPMorgan, Citigroup Inc., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, Goldman Sachs Group Inc., Bank of New York Mellon Corp. and State Street Corp.

To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net; Margaret Chadbourn in Washington at mchadbourn@bloomberg.net.