WASHINGTON - U.S. regulators on Thursday shut down LibertyPointe Bank in New York City, boosting to 27 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession.
The U.S. Federal Deposit Insurance Corp. took over LibertyPointe, with three branches, US$209.7 million in assets and $209.5 million in deposits. The bank catered largely to the Orthodox Jewish community in Manhattan and Brooklyn.
Valley National Bank, based in Wayne, N.J., agreed to assume the assets and deposits of LibertyPointe Bank.
In addition, the FDIC and Valley National Bank agreed to share losses on $181.5 million of LibertyPointe's loans and other assets.
The bank was closed by New York state's banking regulators and the FDIC appointed as receiver on Thursday, rather than on Friday as is customary for bank shutdowns because of the Jewish Sabbath falling at sundown Friday into Saturday.
Many of LibertyPointe's employees are observant Orthodox Jews who don't work on the Sabbath; the FDIC's process for failed banks requires bank employees to work with agency staff in the days following the closure to facilitate the transition.
The failure of LibertyPointe Bank is expected to cost the federal deposit insurance fund $24.8 million.
The pace of bank seizures this year is likely to accelerate in coming months, FDIC officials have said.
As the economy has weakened bank failures have mounted, sapping billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.
The 140 bank failures last year were the highest annual tally since 1992, at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion. There were 25 bank failures in 2008 and just three in 2007.
Depositors' money - insured up to $250,000 per account - is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.