On Friday evening, the Federal Deposit Insurance Corp. said that two more banks had been deemed a failure; the Office of the Comptroller of the Currency had closed both after saying that each was undercapitalized. First National Bank of Nevada, in Reno, Nevada, and First Heritage Bank, N.A., in Newport Beach, California — both owned by First National Bank Holding Company — became the latest victims of a credit crunch that the FDIC has publicly stated will likely lead to 200 bank failures over the next few years. An HW source close to the FDIC, which had suggested the failures to us ahead of their announcement, also noted that the government’s internal estimate of the number of bank failures is closer to 800. That total is roughly equal to the number of failed savings & loans during the S&L crisis of the 1980s and 1990s (more than 1,600 FDIC insured banks failed or received financial assistance between 1980 and 1994, as well). First National of Nevada had total assets of $3.4 billion and total deposits of $3.0 billion, the FDIC said; First Heritage Bank had total assets of $254 million, and total deposits of $233 million. A run on bank assets was avoided over the weekend by an immediate sale of all deposits — including those over the FDIC-insured limit of $100,000 — to Mutual of Omaha Bank; the sale was announced on Friday along with the bank failures. All 28 offices of the two failed banks opened this Monday as branches of Mutual of Omaha Bank. Of the 10 institutions that have failed over the past two years, this is the second time in which another bank acquired all of the failing banks’ insured and uninsured deposits, the FDIC said. The transfer and protection of all deposits contrasts sharply with the failure of IndyMac Bank a few weeks back, where the FDIC has yet to find a buyer, and depositors with over $100,000 in the bank face the prospect of recovering only 50 cents on the dollar. The twin failures came one day after FDIC chairman Sheila C. Bair sought to soothe frayed nerves in an op-ed published by Reuters. “The banking system in this country remains on a solid footing through the guarantees provided by FDIC insurance,” she said. “The overwhelming majority of banks in this country are safe and sound and the chances that your own bank could fail are remote.” Seven FDIC-insured banks have failed so far this year. Related links: OCC release on First National Bank of Nevada, OCC release on First Heritage Bank.

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