Saturday August 29, 07:40 AM

U.S. bank failure tally rises to 84 for 2009

WASHINGTON (Reuters) - Three more U.S. banks failed on Friday, bringing the total to 84 so far this year, as the industry continues to grapple with deteriorating loans on their books.

Regulators shuttered Affinity Bank of Ventura, California, Bradford Bank in Baltimore, and Mainstreet Bank of Forest Lake, Minnesota, which in total are expected to cost the government's deposit insurance fund about $446 million.

The Federal Deposit Insurance Corp on Thursday reported that the insurance fund's balance stood at $10.4 billion at the end of the second quarter. But the agency also noted that the figure was adjusted to account for $32 billion set aside for expected failures over the next year.

FDIC Chairman Sheila Bair said this week that bank failures will remain elevated as banks go through the painful process of recognizing loan losses and cleaning up balance sheets.

The total of 84 failures this year marks a sharp rise over the 25 last year, and the three failures in all of 2007.

She noted that the banking industry's performance is a lagging indicator and will continue to suffer even as the economy begins to improve.

The FDIC also reported this week that the number of institutions on its "problem" bank list grew to 416 at the end of the second quarter, from 305 the prior quarter. Problem banks are institutions whose regulatory rating has been downgraded due to issues related to liquidity, capital levels, or asset quality.

The agency's update on Thursday on the health of the banking industry came a day after the FDIC approved new rules on private equity investment in troubled banks, softening an initial proposal that critics had warned could scare away badly needed capital.