Regulators close banks in four states

WASHINGTON – US bank regulators closed 4 banks in as many states on Friday, bringing the number of failures so far this year to 26 as deteriorating loans continued taking a toll on financial institutions.

The largest of the four was Sun American Bank of Boca Raton, Florida, which had approximately $535.7 million in total assets and $443.5 million in total deposits, the Federal Deposit Insurance Corp (FDIC) said.

Regulators also closed Centennial Bank of Odgen, Utah, Waterfield Bank of Germantown, Maryland, and Bank of Illinois of Normal, Illinois.

FDIC Chairman Sheila Bair has said she expects bank failures to remain high through 2010, even as the economy improves, because the bank industry is continuing to recognize loan losses and clean up their balance sheets.

Regulators closed 140 banks in 2009, up from 25 in 2008 and only 3 in 2007.

The industry's woes are moving from residential loans and complex securities to more conventional types of retail and commercial loans hit hard by the recession.

The 12 branches of Sun American Bank will reopen on Monday as branches of First-Citizens Bank & Trust Company of Raleigh, North Carolina, which is assuming the deposits and purchasing essentially all the assets, FDIC said.

However, FDIC was unable to find a buyer for Centennial Bank so checks will be mailed on Monday to retail depositors for their insured funds, the agency said.

The bank had approximately $215.2 million in total assets and $205.1 million in total deposits. An estimated $1.8 million of those funds were uninsured, but that number could change as more information becomes available, FDIC said.

It encouraged customers with more than $250,000 in their accounts at Centennial to call the FDIC at 1-800-889-4976 to set up an appointment to discuss their deposits.

The FDIC also had to create a new depository institution to take over the operations of Waterfield Bank.

It said the new institution, also called Waterfield Bank, will remain open until April 5 to allow depositors access to their insured funds and time to move their accounts.

Waterfield Bank had $155.6 million in assets and $156.4 million in deposits. After April 5, the FDIC will mail checks to customers who have not closed their accounts or transferred their funds to another institution.

It estimated uninsured funds in Waterfield at about $407,000, but said that could change.

Heartland Bank and Trust of Bloomington, Illinois, agreed to assume the deposits of Bank of Illinois, whose two branches will reopen on Saturday as branches of Heartland.

FDIC said Bank of Illinois had $211.7 million in assets and $198.5 million in deposits. Heartland paid the FDIC a premium of 3.61% to assume the deposits and agreed to purchase essentially all of the failed bank's assets, FDIC said.

Jobless rate hits 5-month low but payrolls fall

WASHINGTON – The US unemployment rate surprisingly fell to a five-month low in January and factory payrolls grew for the first time since 2007, hinting at a labor market recovery even though the economy lost 20,000 jobs.

President Barack Obama cautiously welcomed the figures but said more needed to be done to put people back to work. Obama and his fellow Democrats fear voters could punish them in November congressional elections if headway is not made in tackling unemployment.

The decline in payrolls reported by the Labor Department on Friday was far smaller than the 150,000 drop posted in December. November's data from the survey of employers was revised sharply higher to a gain of 64,000, up from 4,000.

The jobless rate, based on a separate household survey, fell to 9.7 percent from 10 percent in December. That survey found employment rising, with the size of the labor force roughly flat. Analysts had expected payrolls to rise by 5,000 and the unemployment rate to edge up to 10.1 percent.

"The wheels of the economy are turning. The improvement in the employment data does match the increase in GDP the last two quarters so it's not a fluke. The economic recovery looks much more sustainable today," said Chris Rupkey, senior financial economist at Bank of Tokyo/Mitsubishi UFJ in New York, referring to economic growth data for the fourth quarter 2009.

Details of the report were relatively upbeat. The length of the average workweek hit its highest in a year and overtime paid in manufacturing was the most since September 2008, suggesting growing pressure to add to payrolls.

Some analysts, however, were skeptical of the drop in the jobless rate and believed it would head higher again. The pickup in factory employment helped to lift US stocks, despite lingering worries about European fiscal problems.

US government debt prices rose and the US dollar hit an 8-1/2 month high versus the euro, tapping flight-to-quality trades from the troubles in Europe.

Annual revisions to the payrolls data showed job losses since the recession began were much deeper than originally thought. The economy has lost 8.4 million jobs since the start of the recession in December 2007, compared to 7.2 million before the revisions.

In January, the number of 'discouraged job seekers' stood at 1.1 million, up from 734,000 a year ago. Last month, 6.3 million people had been out of work of more than 27 weeks.

Job politics

With Americans increasingly anxious about persistent high unemployment, Obama has declared that job creation will be his top priority in 2010. Announcing plans on Friday to expand credit for small businesses, Obama said the employment report was cause for hope but not celebration.

"Understanding that these numbers will continue to fluctuate for months to come, these are welcome, if modest signs of progress along the road to recovery," Obama said.

Financial markets have grown nervous about the prospect of unemployment in the United States remaining high for a long time. The economy resumed growth in the second half of 2009, but a labor market recovery has yet to materialize.

Labor market weakness is causing households to remain wary of taking on new debt, with total consumer credit declining by $1.73 billion in December, a Federal Reserve report showed.

While the US economy is growing, recovery hopes in Germany were dealt a set back by a sharp drop in industrial output in December.

A survey of banks that do business with the Fed predicted the US central bank will start raising interest rates in the fourth quarter of this year as the labor market mends.

Analysts expect US payrolls to start growing in February as the government steps up temporary hiring for the 2010 census.

"This hiring will continue to push the unemployment rate lower and then once the need for these workers is finished they will be fired and the unemployment rate will drift back up to the 10 percent area," said Brian Fabbri, chief North America economist at BNP Paribas in New York.

Last month, the services sector added 40,000 jobs after shedding 96,000 positions in December. The figure included a rise in federal government employment, partly a result of early hiring for the census.

In another positive trend, temporary help employment rose again last month, while manufacturing payrolls increased 11,000, the first gain since January 2007. Manufacturing employment had dropped 23,000 in December.

But the construction sector continued to struggle, losing 75,000 jobs, likely because of unusually cold weather. Construction payrolls fell 32,000 in December.

In another sign of labor market improvement, the average workweek unexpectedly edged up to 33.3 hours, the highest in a year, from 33.2 in December, while manufacturing overtime rose to 3.5 hours, the highest since September 2008.

"This suggests that firms are straining to keep up with rising demand without hiring. We believe that as long as orders keep streaming in, at some point soon firms are going to have to give in and add workers," said Stephen Stanley, chief economist at RBS in Stamford, Connecticut.

Asia's IT parts makers struggle with demand boom: Analysis

TAIPEI - Wrong-footed by rocketing consumer demand, Asian technology suppliers are scrambling to expand capacity before inventories run dry of everything from semiconductors to flat-panel screens.

Asian components makers, betting on a much longer economic downturn, last year ran down their stockpiles to "very unhealthy levels", according to Nancy Liu, an analyst at Taiwan's Industrial Technology Research Institute.

But demand worldwide for gadgetry ranging from computers to smartphones and liquid-crystal displays is zooming ahead, even if the West's retail sales as a whole are still sluggish. And China is a boom market all by itself.

Jin Sung-Hye, an analyst with South Korea's Shinhan Investment Corp., said Asian component makers were now rushing to ramp up production after failing to forecast the consumer recovery.

"However, higher component prices will not lead to a drastic increase in PC prices, as makers are under pressure to produce upgraded models," she said.

Makers of computers and consumer electronics could instead see their profit margins squeezed, given cut-throat industry competition with consumers used to ever-falling prices on the high street.

And consumers themselves might have to get used to delays in procuring the latest must-have gadgets, a problem that has afflicted Apple's iPhone as Taiwanese chip suppliers struggle to keep up.

Component shortages will linger, with analysts saying it typically takes 15 months from the time a manufacturer decides to boost capacity until production actually picks up.

"Shortages are expected to continue throughout this year and possibly into early next year if the global economy maintains the current pace of recovery," Jin said.

US giant Intel, the world's biggest chipmaker, last week reported its net profit soared nearly 9-fold to $2.3 billion in the last quarter of 2009.

Its booming sales came as industry tracker IDC reported that US computer shipments topped 20 million in the fourth quarter, a record figure, while global PC shipments jumped 15.2% year-on-year.

IDC identified two key factors -- abundant deals on low-priced netbook computers, and pent-up demand as consumers upgraded their PCs after the financial crisis.

Industry shortages mean the semiconductors needed for an average computer are likely to be 2.8% more expensive this year than last, marking the first rise since 2004, according to analyst firm Gartner.

The average selling price for one gigabyte of DRAM, or computer memory, will still decline by eight percent this year. But that compares with much steeper falls of 27 percent in 2009 and 53% in 2008, Gartner said.

"If we look at how bad it was in the first quarter of last year, no one could have predicted that the economy would recover this fast," Taiwan-based Gartner analyst Ben Lee said.

"There was financial turbulence, and companies went bankrupt," he said.

"This has changed with government stimulus plans plus a loose monetary situation. Money is flooding into the market. Everyone can borrow."

The Chinese government implemented a stimulus spree worth $586 billion, and consumers in the world's third-largest economy have played a major role in stoking demand, according to observers.

"The fast recovery in the Chinese market appears to be the main reason" for the global technology boom, said Shinhan Investment's Jin.

Taiwan's Innolux Display Corp. is one technology company being forced into a drastic reappraisal of its plans as it battles to keep up with the demand.

The firm recently announced a merger with rival Chi Mei Optoelectronics Corp. as it vies to take on the big Japanese and South Korean suppliers of flat-panel displays.

The deal was originally expected to be completed in May, but has now been hastily brought forward to March.

"Innolux hopes to integrate the two companies' capacity and ensure a steady supply of panels as soon as possible," said Nancy Liu.