It's getting to the point where banks may be getting a little jumpy when Fridays roll around.

That's because Friday is the day of the week when banking regulators are moving in and closing financially weak institutions across the country. The recession claimed nine more banks last Friday afternoon, according to the Federal Deposit Insurance Corporation.

That brings to 115 the number of banks that have failed so far in 2009.

(Above right: a banking official posts a closure notice on the door of a County Bank branch in February -- Bee file photo)

FDIC insures bank depositors against the loss of their money in the event of a bank's collapse and serves as a clearinghouse to arrange for another bank to take over the failed institution's assets.

A story in Sunday's Bee reported on how the wave of failures is depleting the FDIC's insurance reserve, and the FDIC's plan to collect three years worth of insurance premiums, or assessments, from banks to build up a sufficient cushion to deal with even more failures expected this year and next.

It's the banks, not taxpayers or the government, that pay insurance premiums or assessments to make sure their deposits are insured. But banks are failing faster than the FDIC can collect the assessments.

Local bankers say they're not exactly concerned. For them, paying three years of assessments in advance is at least a palatable solution, if not an ideal one. They'd be paying that money anyway, but now it'll be a lump sum rather than quarterly pieces.

While there is concern that the advance payments may dip into money banks would otherwise have available to make loans in this difficult economy, bankers and FDIC leaders said the shortfall in the insurance reserve is no reason for alarm for depositors.

"This is a non-event for insured depositors," said Arthur Murton, director of FDIC's insurance and research division. "The fund balance going negative has no effect on our ability to protect insured depositors."

"The negative balance is really a way of keeping score of how much the industry is going to have to pay to replenish the fund," he said.

And even though FDIC has a line of credit with the U.S. Treasury to borrow money to cover bank failures, the negative balance is not a red flag for taxpayers, said Robert Hemsath, CEO of Security First Bank and one of the Fresno community bankers who commented for Sunday's story.
http://www.securityfirstfresno.com/

"Taxpayer money has never funded the FDIC, and people lose sight of that," said Hemsath. "FDIC is funded by the banks, and the banks have always paid these assessments in good times and bad."

Failures of large institutions such as Washington Mutual Bank and IndyMac Bank have generated splashy headlines, but the lion's share of failures have been among smaller community banks.

Of 2009's failures, 96 were banks that had $1 billion or less in assets, and all but nine of the institutions had assets of $2 billion or less. They include the central San Joaquin Valley's only failed institution, Merced-based County Bank.

County Bank, which had $1.7 billion in assets, was shuttered in February by state banking officials and put into FDIC receivership. Its operations were taken over by Westamerica Bank. Federal officials estimated County Bank's failure cost the FDIC insurance fund about $135 million.

But the volume of community bank failures, FDIC officials say, is not an indicator of the overall health of those institutions nationwide.

"For all the difficulties and challenges this financial crisis has presented, one of the lessons is \[that\] the community bank model is being affirmed," FDIC Vice Chairman Marty Gruenberg told a community-bank advisory committee last month. "A reliance on core deposits, in institution that's close to its customers and understands their credit needs and challenges ... through all the difficulty you have sustained that activity in a very important way."
http://www.fdic.gov/communitybanking/index.html

Chris Spoth, the agency's senior deputy director for supervision and consumer protection, agreed. "Most community banks will weather this just fine, the vast, vast majority of them," he said.

Hemsath said the high numbers of failures of community banks is not unexpected because small banks far outnumber bigger institutions.

"It's a numbers game. When you look at the number of banks in this country, there's a much greater number of small banks to start with," Hemsath said. But the sheer volume of failures -- big and small -- "puts a strain on all banks in this economic cycle."