Republic Federal Bank, N.A. was closed by regulators on Friday, bringing the total number of bank failures so far this year to 131, the Federal Deposit Insurance Corp said.

Community and regional banks have been failing at the highest annual level since 1992, as the industry grapples with souring loans tied to mortgages and commercial real estate loans made during the credit boom.

Failures are expected to peak next year, government officials have said. The banking industry's recovery generally lags the economy.

Republic Federal Bank, the 13th FDIC-insured institution to fail in Florida this year, had assets of about $433 million and total deposits of about $352.7 million.

FDIC entered into a purchase and assumption agreement with 1st United Bank in Boca Raton, which will assume all of Republic's deposits.

The largest failure of the financial crisis was Washington Mutual, which collapsed in September 2008 and had more than $300 billion in assets.

The FDIC estimated that the costs to the Deposit Insurance Fund, the fund that safeguards bank deposits, will be $122.6 million.

The fund has a negative balance, depleted by the costs of resolving collapsed banks.

The FDIC, which insures bank accounts up to $250,000, is improving its cash position by having banks prepay three years of industry fees. It also has the ability to tap a $500 billion line of credit with the U.S. Treasury Department.

FDIC Chairman Sheila Bair said conditions are starting to slowly improve in the banking industry but that the pace of failures will remain elevated through 2010.

Bair told lawmakers on Friday that toxic assets are still a problem for banks' balance sheets, especially for small banks.

Community and regional banks are also facing mounting troubles with commercial real estate loans. Smaller banks tend to have a larger concentration of such loans because it was a sector of the industry in which they could effectively compete with larger banks during the credit boom.

The FDIC estimates that bank closings will cost the agency about $100 billion from 2009 through 2013.

(Reporting by Gina Keating; Editing by Richard Chang)