Muncie bank taking over after Shelby Co. bank failure

WASHINGTON (AP) - Regulators on Friday closed small banks in Illinois and Indiana, increasing to nine the number of U.S. bank failures this year, a slower pace than in 2011, when there were 92 bank closures.

The number of closures already had dropped sharply in 2011 from the two previous years, when banks were working their way through the bad debt accumulated in the recession. But by this time last year, regulators had shuttered twice as many banks — 18.

The Federal Deposit Insurance Corp. seized Charter National Bank and Trust, based in Hoffman Estates, Ill., with $93.9 million in assets and $89.5 million in deposits, and SCB Bank , based in Shelbyville, Ind., with $182.6 million in assets and $171.6 million in deposits.

Barrington Bank & Trust Co., based in Barrington, Ill., agreed to assume the assets and deposits of Charter National Bank and Trust. In addition, the FDIC and Barrington Bank & Trust agreed to share losses on $72.1 million of Charter National Bank and Trust's loans and other assets.

First Merchants Bank, based in Muncie, Ind., is assuming the assets and deposits of SCB Bank.

The failure of Charter National Bank and Trust is expected to cost the deposit insurance fund $17.4 million. SCB Bank's failure is expected to cost $33.9 million.

Barrington Bank & Trust was the first bank to fail this year in Illinois, which has been one of the states hit hardest by bank failures. Regulators shuttered 16 in Illinois last year.

California, Florida and Georgia also have seen numerous bank failures.

In all of 2010, regulators seized 157 banks, the most in any year since the savings and loan crisis two decades ago. Those failures cost around $23 billion. The FDIC has said 2010 likely was the high-water mark for bank failures from the Great Recession.

In 2009, there were 140 bank failures that cost the insurance fund about $36 billion, more than in 2010 because the banks involved were bigger on average. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three were closed in 2007.

From 2008 through 2010, bank failures cost the fund $76.8 billion. The FDIC expects failures from 2011 through 2015 to cost $19 billion.

The deposit insurance fund fell into the red in 2009. With failures slowing, the FDIC's fund balance turned positive in the second quarter of last year.

By Sept. 30, the end of the federal government's most recent fiscal year, it stood at $7.8 billion.