Nevada Security Bank closes, deposits to Umpqua

WASHINGTON (Reuters) - Nevada Security Bank was seized by regulators on Friday and its $480 million in deposits were transferred to Umpqua Bank, based in Oregon.

The closures bring up the number of U.S. bank failures this year to 83, with hundreds of small banks still struggling to cope with deteriorating portfolios of commercial real estate loans.

Bank failures are expected to peak in the third quarter of this year, and outpace the 140 failures of 2009.

The failure on Friday is expected to cost the FDIC's insurance fund nearly $81 million.

Bank closures have driven the agency's insurance fund -- which covers bank customer accounts up to $250,000 -- into negative territory.

However, the FDIC had banks prepay three years of fees, worth about $45 billion, to give the agency enough cash to handle bank failures.

Next week the FDIC board will meet to provide an update on what they believe will be the total cost of cleaning up the wreckage of bank failures.

The last estimate was that bank failures would cost the agency's insurance fund about $100 billion from 2009 to 2013.

The FDIC has said it is already seeing some encouraging signs of recovery in community banking.

The agency has said more interested buyers are coming to auctions for failed banks, meaning the troubled loans are becoming more desirable.

The FDIC has also scaled back its loss-share agreements, which it entered into with potential buyers of failed banks to hive off some of the risk.

FDIC Chairman Sheila Bair recently said small banks have been able to raise more capital, helping some institutions avoid failure altogether.

(Reporting by Timothy Gardner; Editing by Gary Hill)