On Friday, FDIC Chairman Sheila Bair said that the agency may be forced to tap a $500 billion credit line it has with the U.S. Treasury to replenish its dwindling deposit fund. Congress mandates that the minimum level for the FDIC fund should be 1.15 percent of total insured deposits. As of June, the fund stood at just $10.4 billion, or 0.22 percent of insured deposits.

Irwin Financial Corporation dates its history back to 1863, when Joseph Ireland Irwin, the owner of a mercantile store in Columbus began holding his customers’ money in the shop safe. In 1871, Irwin legally established the bank.

In 1981, the company acquired a mortgage bank in Indianapolis. By 1995, it was writing mortgages and home equity loans in 24 states with a particular focus in California. The bank sowed the seeds of its destruction even as it racked up record earnings in the early part of this century. When the economy turned, so did all of those loans. The company lost more than $450 million in the last six quarters, according to the Associated Press.

On Tuesday, the Federal Reserve issued a cease and desist order against Irwin demanding that it raise more capital by the end of the month. The following day, the bank admitted that there was no way it could find the funds. On Friday, the FDIC entered into a purchase and assumption agreement with First Financial Bank of Hamilton, Ohio to assume all the deposits of the two banks.

The FDIC last closed insured banks in Indiana and Kentucky in 1992 and 1991 respectively.

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In April, Univest was invited to attend the annual Corporate Philanthropy Summit in Philadelphia to be recognized as a top corporate giver in the Philadelphia Business Journal’s 2010 Book of Lists. As a top charitable corporation, Univest received a reward as number 16 under the Top 25 Most Charitable Givers in 2007 as well as the Most Charitable Giver and Top Philanthropic Donor as a large company.

“As a community bank, our success is directly impacted by the strength of the neighborhoods and communities in which we operate,” said K. Leon Moyer, president and chief executive officer of Univest National Bank and Trust Co. “We are honored to be recognized with these two prestigious awards for our ongoing contributions to the communities we serve. Univest’s ongoing commitment and contributions to our communities are integral parts of our corporate culture. Fostering more prosperous communities not only enriches the lives of our neighbors, but results in a healthier environment in which Univest and every other local business can operate successfully.”

Univest’s financial support focused on nonprofit organizations serving individuals and families throughout Bucks, Chester, Montgomery and Lehigh counties in areas of arts, culture, education, youth athletics and senior citizen programs. In addition, Univest continued its participation in the EITC (Educational Improvement Tax Credit) program to support private educational schools advance their mission and unique educational services throughout our communities.

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About Univest Corporation

Headquartered in Souderton, Pennsylvania, Univest Corporation of Pennsylvania (www.univest.net) and its subsidiaries serve the financial needs of residents, businesses, and nonprofit organizations in Bucks, Chester, Montgomery and Lehigh counties. Univest National Bank and Trust Co., a member of the FDIC and an Equal Housing Lender, offers customers 32 financial service centers, 12 retirement financial services centers, and 38 ATM locations throughout the region, and is the parent company of Univest Capital, Inc., a small ticket commercial finance business; Univest Insurance, Inc., an independent insurance agency headquartered in Lansdale, Pa., which serves commercial and personal customers; and Univest Investments, Inc., a member of FINRA and SIPC and a full-service broker-dealer and investment advisory firm. For more information on Univest Corporation of Pennsylvania and its subsidiaries, please visit www.univest.net.

This press release and the reports Univest Corporation files with the SEC often contain “forward-looking statements” relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets and products of Univest Corporation and are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Univest Corporation’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce net interest margins; (3) changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which Univest Corporation is engaged; (6) technological issues which may adversely affect Univest Corporation’s financial operations or customers; (7) changes in the securities markets; or (8) other risk factors mentioned in the reports and registration statements Univest Corporation files with the SEC. Univest Corporation undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

National Penn’s donation will be administered through the Kutztown University Foundation to the Pennsylvania Institute for Children’s Environmental Health (PICEH). PICEH, known for the partnerships it has built with a number of public schools, hospitals, doctor’s offices, government agencies and not-for-profit organizations, is assisting with an educational pilot program for Oley Valley School District. A large portion of National Penn’s donation was used to help the school district develop an air monitoring system on the roof of the Oley Valley Middle School. Students from both the middle school and the high school are utilizing the air monitoring system to gather and read air quality data through this hands-on pilot program.

“The funds donated by National Penn are working to further the education of students on the environment”, said Patricia Zong, administrator for PICEH. She added, “The generosity of National Penn and our partnership with Kutztown University and Oley Valley School District are helping us succeed in our mission of understanding the differences between a child and an adult and creating solutions to protect children from environmental harm via education, research and outreach.”

PICEH, which was created through the Berks County Environmental Advisory Council, continually works to promote public education of children’s environmental health issues and is one of only 15 groups recently honored by Governor Edward G. Rendell and the Pennsylvania Department for Environmental Protection for its work on children’s health issues.

“At National Penn we believe we have a social responsibility to our local communities. Part of this responsibility includes starting our youth off on the right educational path. We are pleased to support this pilot program as it not only proves to be a hands-on educational program but also raises environmental awareness among the students and the surrounding community,” said Scott Gruber, National Penn Central Region president.

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About National Penn Bancshares, Inc.

National Penn Bancshares, Inc., with $9.8 billion in assets, is the fourth largest bank holding company based in Pennsylvania.  In addition, wealth assets under administration or management amount to $8.1 billion.

Headquartered in Boyertown, National Penn operates 127 offices. It has 124 community banking offices in Pennsylvania and one office in Maryland through National Penn Bank and its HomeTowne Heritage Bank, KNBT and Nittany Bank divisions. National Penn also has two offices in Delaware through its wholly-owned subsidiary Christiana Bank & Trust Company.

National Penn’s financial services affiliates consist of National Penn Wealth Management, N.A., including its National Penn Investors Trust Company division; National Penn Capital Advisors, Inc.; Vantage Investment Advisors, LLC; Institutional Advisors LLC; National Penn Leasing Company; National Penn Insurance Services Group, Inc., including its Higgins Insurance division; and Caruso Benefits Group, Inc.

National Penn Bancshares, Inc. common stock is traded on the Nasdaq Stock Market under the symbol “NPBC”. Please visit our Web site at www.nationalpennbancshares.com to see our regularly posted material information.

In this issue:

• “Safe” Treasuries Face Increasing Interest Rate Risk
• Why 401(k) Investments Should Be Monitored Frequently
• Excessive Withdrawal Rates Can Hamstring Retirees
• Assessing Target-Date Funds
• Dynasty Trusts Attract the Interest of Farsighted Families
• Lifetime Income Products

For fixed income investors, the impact that fiscal and monetary stimuli may have on U.S. Treasury debt in the coming years is cause for concern.

The U.S. government, U.S. Treasury and U.S. Federal Reserve have initiated many funding facilities and programs in an effort to stabilize both the lending markets and the U.S. economy.  Record U.S. debt issuance to fund these initiatives will put upward pressure on interest rates as investors attempt to absorb the additional supply.

U.S. Treasuries provided strong returns in 2008 as investors sought safety and liquidity, driving interest rates across the U.S. Treasury yield curve to historic lows.  As fiscal and monetary stimulus measures are effective in stemming the slide of economic conditions, investor confidence will pick up and risk aversion will subside.  Demand for U.S. Treasuries will weaken as investors reposition their portfolios seeking higher yielding securities.

Hampered by weak consumer and business spending, high unemployment, and a housing market that is still in the corrective phase, the U.S. economy has yet to stabilize.  Consistent with past recessions, the U.S. economy will rebound and prosperity will return.  Although inflation is expected and welcomed during economic recoveries, higher than expected inflation is likely due to the historic levels of monetary and fiscal stimuli used to reignite our economy.  Higher inflation erodes the value of fixed income investments and leads to higher U.S. Treasury yields in order to compensate investors for a decline in purchasing power.

Given this confluence of inflationary factors, investors will be wise to avoid long-term Treasury bonds and favor short-duration issues and Treasury Inflation-Protected Securities (TIPS).  Corporate bonds continue to offer value despite the fact that year-to-date 2009 performance is already nearing double digits.  Firm selection will be very important as company fundamentals will ultimately drive future performance.

James D. King, president and chief investment officer

National Penn Investors Trust Company

National Penn Investors Trust Company provides investment management and trust services to individual, corporate and institutional clients.

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Why 401(k) Investments Should Be Monitored Frequently

It is common for 401k plan sponsors to conduct an annual review of their investments ─ the frequency traditionally recommended by advisors ─ but both the plan and its participants may achieve greater benefit from quarterly reviews.

We understand that quarterly reviews may sound unreasonable for many small businesses whose management is already hard pressed for time. However, companies that begin to monitor their plan’s investment options more regularly quickly perceive why this can be advantageous.

For starters, frequent monitoring helps alert plan sponsors to potential problems more quickly and to react in a timely manner. For example, assume that a quarterly review reveals that for the past two quarters a particular fund in the plan has dramatically underperformed its peers. This can enable the plan sponsor to begin to investigate immediately, rather than to find six months later that the fund has lagged its peer group for an entire year.

In our example, the fund’s disappointing performance may be due to a spell of bad luck that will ultimately be overcome. However, it also is possible that other less favorable factors may be at work, such as:

• A key member of the investment team may have departed
• The investment team may be distracted after assuming responsibility for an additional fund
• A new subadvisor may have been hired by the manager
• The overall investment management organization may be experiencing internal instability
• The investment team may have drifted from its stated philosophy and process

There also are many other possibilities – but whatever the problem may be, it is the responsibility of the plan sponsor and the plan’s advisor to address the issue on as timely a basis as possible.

An additional reason to review plan investment options every quarter is that 401(k) participants have become much more active in asking questions about their portfolios. That’s hardly surprising, given the recent dislocation in the markets and the rise in participant concerns. Quarterly investment reviews place the sponsor and its advisor in a far more informed position to answer participant questions.

Frequent monitoring of portfolios also improves the ability of the plan’s advisor to help participants adjust asset allocation models and assess which options might serve them best.

E. Vaughn Landes, president

National Penn Capital Advisors

National Penn Capital Advisors is a registered investment advisor that consults to 401(k) and other defined contribution plans and addresses the personal wealth needs of business owners and their key employees.

Securities provided by National Penn Capital Advisors are offered exclusively through NRP Financial, Inc.

Member FINRA/SIPC

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Excessive Withdrawal Rates Can Hamstring Retirees

Bear markets can do considerable damage to a retiree’s investment portfolio. However, retirees also face considerable peril if they withdraw too much money from their portfolio over time.

Excessive withdrawals are a stealth threat to financial security: By the time retirees realize that they have depleted too much of their retirement savings, the damage often is past repair.

Many retirees mistakenly assume that their withdrawal rate can be the same as the interest rates from a CD or a bond fund – but those rates often are higher than the 4 percent annual withdrawal rate that many financial advisors recommend.

In 1994, a research paper published by William Bengen revealed that retirees who draw down 5 percent a year run a 30 percent chance that their nest egg will “run out of steam before they do.”  Conversely, retirees who draw down no more than 4.2 percent of their portfolio each year are likely to have a sufficient income stream for their entire retirement.  A more recent study confirms this. It found that 4.4 percent is the lowest initial withdrawal rate that survived any rolling 30 year period since 1871.

Retirees often do not consider the relationship between their withdrawal rate and inflation. Twenty years from now, at an average inflation rate, a retiree may require $180,000 to equal the purchasing power of $100,000 today. An optimal retirement portfolio will continue to grow so that the size of annual withdrawals also can grow, even as the withdrawal rate remains the same.

Historically, a portfolio that balances equities and fixed income and has a withdrawal rate in the neighborhood of 4% will enable a retiree to maintain purchasing power. Higher withdrawal rates make this difficult to achieve, especially in periods where inflation is above average or when a portfolio declines in value due to a bear market.

Robert R. Thomas, CFA, CFP®, president & CEO

Vantage Investment Advisors, LLC.

Vantage Investment Advisors, LLC. is a registered investment advisor that provides investment management services to individuals, trusts and qualified plans.

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Assessing Target-Date Funds

Many 401(k) plan participants were deeply disappointed by the 2008 performance of certain target-date funds.  Among 31 funds with a 2010 target-date for retirement, the average loss approached 25 percent. For those investors who plan to retire in the next several years, the damage to their 401(k) nest egg may be long lasting.

The investment performance of the worst performing funds was generally exacerbated by aggressive allocations to riskier assets, such as equities and REITs. In years when these assets performed well, 2010 target-date funds with significant equity/REIT exposure generated higher returns than more conservative 2010 funds. However, the conservative funds subsequently proved to be less vulnerable to the 2008 market downturn.

Many plan sponsors mistakenly assume that funds with the same target-date tend to have similar glide paths, i.e., the progression of a fund’s asset allocation from a more to less risky investment profile over time. In actuality, there can be great dispersion in regard to how target-date funds are managed. For example, some target-date funds emphasize wealth preservation as the investors’ retirement date approaches, to protect against heavy losses in the event of a market downturn. That is especially important if soon-to-retire participants plan to transition their plan assets to an annuity or other income producing vehicle. Other funds may seek to manage the fund to a date well past an investor’s retirement. To help investors remain ahead of inflation during a conceivably long retirement, these funds generally maintain a riskier profile. Both approaches may be reasonable, but both may not be suitable for all participants. Sponsors should decide which philosophy is most appropriate for their employee population.

401(k) participants should not automatically invest in a target-date fund simply because it is one of the options offered by the retirement plan. It is essential for every participant to evaluate the risk and return parameters of their fund.

One of the first questions is whether a target-date fund’s glide path is appropriate. The answer depends to a great extent on the number of years prior to a participant’s expected retirement. A relatively high allocation to historically volatile assets may be fine for an investor whose retirement is a decade or more away. However, if the glide path allows for an aggressive allocation close to the target-date, caution may be advised.

Most 401(k) participants do not have the background or access to data that can enable them to easily make this determination. However, the plan administrator or advisor to the plan should be able to provide perspective on the degree of risk assumed by a target-date fund at any given point in its glide path progression.

Trisha Brambley, president

RESOURCES for Retirement

RESOURCES for Retirement provides investment fiduciary services and plan consulting to retirement plan sponsors.

Securities provided by RESOURCES for Retirement are offered exclusively through NRP Financial, Inc.

Member FINRA/SIPC

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Dynasty Trusts Attract the Interest of Farsighted Families

Delaware is among a number of states that offer dynasty trusts, which are becoming an increasingly popular tool for wealthy families.

For families that seek to create a multi generational legacy, dynasty trusts can remain in force either in perpetuity or for many years.  Like many other trusts, these vehicles enable their creators to:

• control how their money is deployed or managed when grandchildren and successive generations receive it;
• take advantage of estate planning techniques that minimize the impact of federal transfer taxes in future generations; and
• bolster protection from creditors or former spouses.

Personal reasons vary when it comes to establishing dynasty trusts. Sometimes the creators of these vehicles simply seek to protect their assets to the greatest extent possible, so that the fortune remains within the family and can be enjoyed and used productively by multiple generations. Other families of great wealth may be concerned that not every present or future member will handle his or her finances in a prudent manner, or that a family member – perhaps yet unborn – will be impaired by a serious disability.

As noted above, a highly compelling reason to enter into this type of trust is the ability to mitigate family federal transfer taxes across multiple generations. Dynasty trusts leverage the exemption amount that can be placed in trust (currently $3,500,000), as this sum will not be subject to transfer taxes again until trust assets are fully distributed. Creators of Delaware dynasty trusts can choose when the trust terminates as far down the lineal chain as they wish.

Due to their longevity, it is important to build sufficient flexibility into the terms of a dynasty trust.  Delaware’s tax laws, for example, permit trustees to divide duties among several entities or individuals, each of which is considered to be a fiduciary and subject to traditional fiduciary standards and obligations.  When a number of advisors, family members and corporate trustees are involved, rather than a single trustee or advisor, the risk is reduced that the trust will be administered in a manner that departs from the trust creator’s original wishes.

Thomas A. Campbell, EVP and chief trust officer

Christiana Bank & Trust

Christiana Bank & Trust Company provides banking, fiduciary, agency and investment services that allow clients to take advantage of Delaware’s robust, clear and predictable business and trust law.

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Lifetime Income Products

It has become increasingly apparent that a large number of baby boomers simply have not saved enough. Many of these individuals believed that their retirement could be financed by home equity or that their 401(k) account alone was a sufficient savings vehicle.

Whatever the cause of under saving, there is an urgent need for many individuals nearing or in retirement to find a second source of lifetime income. The first source, of course, is Social Security, which in many cases may prove inadequate to cover all retirement expenses.

Households that have accumulated a retirement nest egg via their 401(k) or other means may be planning on withdrawing a planned amount each year during retirement. However, there is no assurance that these savings or investments will continue to provide sufficient purchasing power over a 10, 20 or 30-year period. Occasional market downturns can seriously reduce a retiree’s principal, and periods of low interest rates and inflation can decrease the absolute or relative value of investment income.

For a growing number of retirees, one solution may be the new generation of lifetime income products, such as a fixed annuity. Backed by insurers, these products assure* investors of receiving income throughout their entire retirement, thereby removing the threat of running out of money**. The income thrown off by a lifetime income product also may be a potentially effective diversifier within a larger retirement portfolio.

The guaranteed death benefit offered by many lifetime income products may ensure that the beneficiary (or beneficiaries) will have a postmortem income stream. Beneficiaries also may have access to multiple fund managers to help to potentially maximize returns, and are allowed to dollar-cost-average*** into their investment.

Provided by, Edward Cwalina, senior vice president, investment executive

National Penn Investment Services

National Penn Investment Services offers a range of financial services inclusive of financial planning, brokerage, securities, and investment services.

Editorial assistance provided by Ben-Abraham Associates

PrimeVest Financial Services, Inc. (PrimeVest) is an independent registered broker-dealer. Member FINRA/SIPC. National Penn Investment Services is a marketing name for PrimeVest which is offering securities at National Penn Bank (NPB) and its affiliates. PrimeVest is not affiliated with NPB or National Penn Investors Trust Company (NPITC), a limited purpose trust company of NPB. Neither NPB or NPITC is a broker-dealer or insurance agency. Ben Abraham Associates is not affiliated with PrimeVest.

Securities and insurance products offered are:

● Not a Deposit ● Not FDIC Insured ● Not Insured by Any Federal Government Agency

● Not Guaranteed by National Penn Bank ● May Lose Value

*Guarantees are backed by the claims paying ability of the issuer.

**Lifetime income enhancements may involve higher fees and expenses.

***Dollar cost averaging will not guarantee a profit, or protect you from loss, but may reduce your average cost per share in a fluctuating market.

^{_____________________________________________________}

For more information, please contact: Catharine S. Bower, director of corporate communications at 610.369.6618 or catharine.bower@nationalpenn.com

Catharine S. Bower

Senior Vice President

Corporate Communications

National Penn Bancshares, Inc.

P.O.Box 547

24 North Reading Avenue

Boyertown, PA 19512

p. 610.369.6618

f.  610.369.6153

In a new report, the Center for Public Integrity found that “of the 25 top participants in the program, at least 21 were heavily involved in the subprime lending industry,” most through specializing in servicing subprime loans, but several both serviced and originated the loans. By far the largest is scandal-ridden Countrywide, now a part of Bank of America. More than 10 percent of the $50 billion of TARP funds earmarked for the foreclosure program has been set aside for Countrywide. The money will be used to pay Countrywide for modifying loans, but will also go to investors in the loans and Countrywide borrowers who keep current after modification. Despite these carrots, a recent Treasury Department report showed Bank of America lagging behind the other major lenders in its pace of modifying loans.

The Center for Public Integrity’s report is a follow-up to an earlier one that identified the top 25 subprime lenders from 2005-2007 and their financial backers, many of which were financial firms that received TARP funds through other programs.

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Story courtesy of Propublica
by Paul Kiel

The saga of Ian and Megan Bearce of Glendale, Calif., puts a face to those numbers.

The Bearces have been waiting for a loan modification from Bank of America for three months. Their deadline for a decision has been pushed back twice. Their financial information has gone missing. Their calls have gone unreturned.

“Adding insult to injury,” Megan said in June, “is a giant pullout from Money Magazine this month sponsored by Bank of America with advertising stating: ‘We’re going to work very hard for you to try and get those mortgage payments down to help you stay in your home. That’s a huge priority for us.’ Right.”

She added: “There’s all this propaganda, but when you try to work with them, nothing happens. We’re in a holding pattern.”

Ian, an executive at a company that produces commercials, called Bank of America on May 15, the day he found out that his salary was being slashed for the second time in two years. The Bearces had just had their second child and could barely afford their monthly expenses. They began eating away at their savings and putting thousands of dollars on credit cards every month, but they managed to keep up with their mortgage payments. They pay $2,866 a month on their first mortgage, including taxes and insurance, and $221 on their second. They also pay health insurance out of pocket; that’s another $768 a month.

It turns out they would have had a better chance of getting help early on if they had been less responsible. When Bank of America began modifying loans under the government’s Making Home Affordable program in April, it concentrated on borrowers who were already in default,  spokesman Rick Simon said.

But when the Bearces called in May, they said, a Bank of America employee told them they weren’t eligible for the program because they hadn’t missed any payments and because their mortgage wasn’t held by Fannie Mae or Freddie Mac. Both claims about the program are untrue (but not uncommon). Housing counselors have complained that employees at participating servicers often display an “alarming ignorance” of the program, as Diane Thompson of the National Consumer Law Center put it at a Senate panel hearing in June.

Simon disputed that account. What the employee probably told the Bearces, he said, was that their loan didn’t meet the criteria for loans being prioritized by the bank, but that they might be eligible in the future. (Ian said he had asked to record the call with Bank of America but was told he would be disconnected if he did.)

Megan said they were told in that first phone call that, even though they weren’t eligible for Making Home Affordable, “we could send in our financial info and a letter why we were requesting a mod and they maybe could do something.”

On May 17, they sent in tax returns, pay stubs, debt and income data, and a letter explaining why they needed help. “We had to send our financial information three different times before they could confirm they received it,” Megan said. Finally, on May 26, they were told that all of their paperwork was in order and it would take 30 to 60 days to decide whether to modify their loan.

One month later, the couple hadn’t heard. But an hour after ProPublica inquired about the status of their case, they got a phone call from Bank of America — their first — and were relieved to finally be assigned a case manager, Terri. Terri told them to wait another 30 days.

Thirty days went by, and Terri wasn’t returning their phone calls.

In the early days of August, they were assured by three separate employees that they would have a decision by Aug. 6. That day, too, came and went without any contact.

On Aug. 10, Ian called the bank’s 800 number and was given a new deadline: the end of the month. Two staffers offered to try to track down the elusive Terri, who called Ian later that day. She asked him to fax in their 2007 tax return and updated information concerning Megan’s income as a therapist, but she couldn’t give him a timeframe for a decision.

Terri called again on Aug. 18 and said she was meeting with “management” in the next few days to discuss their case. Megan asked if she thought Bank of America would work with them on any type of modification. Terri couldn’t say.

According to Simon, the company spokesman, the Bearce’s request is being “actively pursued.” In the meantime, they’re still current on their mortgage, but their credit card debt is mounting. After paying their mortgage, health insurance and child care costs, “there’s not much left for diapers and groceries and gas,” Megan said. “Those go on the credit card.”

Not all servicers share Bank of America’s sluggish performance. JPMorgan Chase, another large servicer participating in the government’s program, has helped more homeowners than Bank of America has, despite having about half the number of eligible loans, according to the Treasury Department. It managed to modify 20 percent of its most delinquent eligible loans by the end of July. The average among participants was 9 percent, but that figure takes into account servicers that had signed up just 20 days before. Bank of America, meanwhile, has had four months to implement the program.

Both the media and the administration have publicly flogged the program’s laggards, of which Bank of America, which now includes Countrywide, is the largest.

“We think they could have ramped up better, faster, more consistently,” said Michael Barr, the Treasury Department’s assistant secretary for financial institutions, on Aug. 4. “And we expect them to do more.”

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Story Courtesy of Propublica

by Alexandra Andrews, ProPublica

….

by Jake Bernstein

Four banks failed Friday bringing the total for the year to 81. The largest by far was Guaranty Bank. With assets of $13 billion, the Austin-based savings and loan is the third largest bank failure this year, behind Colonial BancGroup (assets: $25.5 billion) and BankUnited (assets: $13.7 billion). Two of the three banks—Guaranty and BankUnited—were regulated by the Office of Thrift Supervision.

The FDIC estimates that the failure will cost its insurance fund $3 billion. Guaranty’s closure might accelerate a controversial plan by the FDIC to levy a special assessment fee against banks to help replenish the fund. As of March 31, the fund was down to $13 billion. By law, the agency must shore up the fund when the reserve ratio, or balance divided by insured deposits, falls below 1.15 percent. It was at 0.27 percent as of March 31, Bloomberg News reports, with bank failures in the past four months costing the FDIC more than $19 billion.

The FDIC sold $12 billion of Guaranty’s assets along with approximately $12 billion in deposits to Banco Bilbao Vizcaya Argentaria of Spain. To make the deal more palatable, the FDIC agreed to shoulder more than 80 percent of the losses from bad loans, amounting to about $9.7 billion. This is the first time since 1991 that “an overseas bank received federal assistance in a failed bank deal,” according to The New York Times.

Like most of the banks that failed this year, Guaranty drowned under bad real estate loans. It lost $174 million in the second quarter alone. A third of Guaranty’s single family mortgage portfolio consisted of option adjustable rate mortgages, so called option ARMs, and the bank had $1.2 billion of loans to homebuilders, many of them in California, according to Fortune.

Among the three other banks that failed yesterday, two were in Georgia. The cost to the FDIC deposit fund from the Georgia failures was $111 million. A total of 18 banks have failed in Georgia in 2009. The deposits of First Coweta of Newnan and ebank of Atlanta were taken over by United Bank of Zebulon, Ga., and Stearns Bank, National Association of St. Cloud, Minn., respectively. Stearns Bank has acquired the deposits of five failed banks since the onset of the financial crisis.

Additionally, the FDIC closed CapitalSouth Bank of Birmingham, Ala. Its deposits were taken by IberiaBank of Lafayette, La. The total cost to the FDIC was $151 million.

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Story Courtesy of Propublica