Federal regulators close small bank in Illinois

WASHINGTON - Regulators on Friday shut down National Bank of Commerce, a small Illinois bank.

The Federal Deposit Insurance Corp. was appointed receiver of the Berkeley, Ill., bank, which had $430.9 million in assets and $402.1 million in deposits as of Jan. 7. It was the first federally insured bank to fail and be shuttered by regulators this year amid the pressures of tumbling home prices, rising mortgage foreclosures and tighter credit.

The FDIC said all of National Bank's deposits will be assumed by Republic Bank of Chicago, based in Oak Brook, Ill. Its two branches will reopen Saturday as offices of Republic Bank. That bank also will buy about $366.6 million of National Bank of Commerce's assets; the FDIC will retain the rest for eventual sale.

The FDIC estimated that the resolution of National Bank of Commerce will cost the federal deposit insurance fund $97.1 million.

Regular deposit accounts are now insured up to $250,000 as part of the financial rescue law enacted in October.

The 25 U.S. bank failures last year compare with three for all of 2007 and are far more than in the previous five years combined. It's expected that many more banks won't survive this year's continued economic tumult.

Acting on President-elect Barack Obama's behalf, President Bush this week asked Congress for release of the second $350 billion in the federal financial rescue program, and the Senate voted 52-42 on Thursday to turn back an effort to block its release.

Seattle-based thrift Washington Mutual Inc. failed in late September, the biggest bank collapse in U.S. history. It had $307 billion in assets.

The FDIC estimates that through 2013 there will be about $40 billion in losses to the deposit insurance fund, including an $8.9 billion loss from the failure of IndyMac Bank last July. The agency has raised insurance premiums paid by banks and thrifts to replenish its fund, which now stands at around $34.6 billion, below the minimum target level set by Congress and the lowest level since 2003.

The FDIC has put in a program to guarantee as much as $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan. Under the program, meant to thaw the freeze in bank-to-bank lending, the FDIC will provide temporary insurance for loans between banks — except for those for 30 days or less — guaranteeing the new debt in the event of payment default by the borrowing bank.

Of the roughly 8,500 federally insured banks and thrifts, the FDIC had 171 on its confidential list of troubled institutions as of Sept. 30 — a nearly 50 percent jump from the second quarter and the highest tally since late 1995.

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National Bank of Commerce customers with questions can call the FDIC at 1-800-760-3641.

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