The US Treasury has shut down two affiliated banks as the impact of the US property crash rolls through the country's financial institutions.
Over the weekend, the Treasury's Office of the Comptroller of the Currency took over First Heritage Bank of Newport Beach, California, and First National Bank of Nevada, based in Reno, Nevada, declaring both undercapitalised and facing losses that would wipe out their capital.
'The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank,' the Federal Deposit Insurance Corporation said in a statement. In addition to taking over the deposits, Mutual of Omaha Bank will pay $200m for assets of the two closed banks, which are now in receivership under FDIC control.
The closures took to 10 the number of banks closed in the country in the past 18 months, as the collapse of property prices, the spread of mortgage defaults and the crumbling of the markets for billions of dollars worth of securities tied to mortgages.
Earlier this month, the FDIC seized control of the large IndyMac Bank, which was weakened by heavy exposure to risky sub-prime mortgages and collapsed after a run by depositors.
The closures also came as the US Congress approved a package of measures to shore up Fannie Mae and Freddie Mac, the two huge publicly-owned, government-chartered home finance banks that touch some 50% of all mortgages in the country.
Both the newly closed banks were owned by First National Bank Holding Company of Scottsdale, Arizona.
With 25 branches, the 20 year old First National Bank of Nevada had $3.4 billion of assets on its books, the OCC said. Tthe bank was weakened by 'unsafe and unsound practices,' it said. First Heritage Bank had three branches and about $250m in assets.
The two sister banks focused their lending on the property markets in Nevada and Arizona.
Both regions experienced huge booms in building between 2002 and 2006, and have since been the sites of some of the sharpest plunges in home prices across the country, and the highest rates of home loan defaults.
