Regulators shutter bank in Tennessee; brings this year's US bank failures to 16

WASHINGTON – Regulators closed a small bank in Tennessee, bringing the number of U.S. bank failures to 16 this year.

The Federal Deposit Insurance Corp. said Friday that it seized Mountain National Bank, based in Sevierville, Tenn.

The lender, which operated 12 branches, had about $437.3 million in assets and $373.4 million in deposits as of March 31.

First Tennessee Bank, NA, based in Memphis, Tenn., agreed to assume all of the failed bank’s deposits and to buy essentially all its assets.

The failure of Mountain National Bank is expected to cost the deposit insurance fund $33.5 million.

U.S. bank failures have been declining since they peaked in 2010 in the wake of the financial crisis and the Great Recession.

In 2007 only three banks went under. That number jumped to 25 in 2008, after the financial meltdown, and ballooned to 140 in 2009.

In 2010 regulators seized 157 banks, the most in any year since the savings and loan crisis two decades ago. The FDIC has said 2010 likely was the high-water mark for bank failures from the recession. They declined to a total of 92 in 2011.

Last year bank failures slowed to 51, but that’s still more than normal. In a strong economy an average of only four or five banks close annually.

The sharply reduced pace of bank closings shows sustained improvement.

From 2008 through 2011, bank failures cost the deposit insurance fund an estimated $88 billion, and the fund fell into the red in 2009. With failures slowing, the fund’s balance turned positive in the second quarter of 2011.

The fund had a $35.7 billion balance as of March 31, up from $32.9 billion at the end of December.

The FDIC expects bank failures from 2012 through 2016 will cost the fund $10 billion.

The agency reported last week that U.S. banks earned more from January through March — $40.3 billion — than during any quarter on record, buoyed by greater income from fees and fewer losses from bad loans.