Regulators shut banks in Illinois, Wash. state

WASHINGTON (AP) -- Regulators on Friday shut down a small bank in Illinois and one in Washington, lifting to 63 the number of U.S. bank failures this year.

The pace of closures has slowed, however, as the economy has stabilized and banks work their way through the bad debt accumulated in the Great Recession. By Aug. 6 last year, regulators had shuttered 109 banks.

The Federal Deposit Insurance Corp. seized Bank of Shorewood, in Shorewood, Ill., with $110.7 million in assets and $104 million in deposits. Bank of Whitman, in Colfax, Wash., with $548.6 million in assets and $515.7 million in deposits, also was shuttered.

Bank of Shorewood had three branches. It is the sixth bank in Illinois to fail this year.

Bank of Whitman had 20 branches, though only eight of them were scheduled to reopen Monday, the FDIC said. It is the third bank in Washington state to fail this year.

Heartland Bank and Trust Co. in Bloomington, Ill., agreed to assume Bank of Shorewood's deposits and essentially all its assets. Columbia State Bank in Tacoma, Wash., agreed to assume Bank of Whitman's deposits and $314.4 million of its assets. The FDIC said it will keep the remaining assets and look to sell them off later.

The failure of the two banks is expected to cost the deposit insurance fund $160.4 million, combined.

The pace of bank failures has slowed this year as lenders work their way through piles of bad debt. A slow, but improving U.S. economy also has helped stem the number of bank casualties.

In 2010, regulators seized 157 banks, the most in a year since the savings-and-loan crisis two decades ago. The FDIC has said that year likely marked the peak for bank failures from the Great Recession.

There were 140 bank failures in 2009, costing the insurance fund about $36 billion. The failures last year cost around $21 billion, a lower price tag because the banks involved were smaller 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 deposit insurance fund fell into the red in 2009.

With failures slowing, the FDIC's deficit narrowed in the first quarter of this year; it stood at about $1 billion as of March 31.

Depositors' money - insured up to $250,000 per account - is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted last July.