NEW YORK — The IndyMac Bancorp Inc. problem is fast becoming a regional bank problem.

After federal regulators on Friday seized the Pasadena, Calif. bank company, the shares of regional banks plunged Monday and in one case, National City Corp., even halted in mid-day trading. Investors fled the sector amid rampant fear the mortgage crisis has more regional-bank failures lying in store, and that problems at mortgage giants Fannie Mae and Freddie Mac could bode more ill for regional lenders.

National City shares fell more than 32% before the New York Stock Exchange halted trading of its shares so the Cleveland bank could address "market rumors" of a run by its customers.

Addressing rumors in the market is typically an extreme form of action for a publicly traded company, and Nat City released a brief statement that it had seen "no unusual depositor or creditor activity." A spokeswoman for the bank declined to elaborate.

Nat City is undoubtedly confronting high 90-day delinquency rates, which can be a reliable indicator of heavy future losses. Yet, Nat City was also one of the first regional banks amid the subprime-mortgage crisis to raise fresh capital in order to offset future losses, raising $7 billion in May.

In a rumor-filled era that has already claimed storied names like Bear Stearns, however, investors and analysts are not very quick to dismiss market panics.

"On the positive side, National City was among the first of its peers to raise capital and build reserves," said Lana Chan, an analyst at BMO Capital Markets, in a note to investors. On the other hand, she said, "we are concerned that market rumors, especially in this environment, can become somewhat self-fulfilling prophecies (a la Bear Stearns)."

Seattle-based Washington Mutual Inc. (WM), the nation's largest thrift, is also confronting bearish prophecies. WaMu shares fell recently fell 34% to around $3 after an analyst at Lehman Brothers warned the hobbled West Coast bank — a poster child for the boom-to-bust subprime crisis — will not turn a profit until the latter half of 2009. WaMu's shares have fallen more than 92% since reaching a 52-week high of $43.52 in July, and Wednesday's fall to a new low of $3.03 has only fueled widespread suspicion that the bank will eventually sell itself.

A spokesman for WaWu said a response from the bank was not immediately available.

Analysts at Goldman Sachs Group Inc. downgraded Zions Bancorp to sell, and the Zions shares fell more than 21% to $5.31.

Huntington Bancshares Inc., another Ohio bank whose shares have see-sawed in recent weeks — but which released no new news on Monday — was down over 12% to $4.96.

A spokeswoman for Huntington did not immediately return a request for comment.

Even the healthier regional banks have been hit by Monday's woes.

M&T Bank Corp. seemingly picked a poor day to announce a 25% drop in second-quarter earnings — from $1.95 a share to $1.44 a share. Even though the bank seems to have less exposure to the most toxic areas of the lending market, shares nonetheless fell more than 22% in mid-day trading before seeing a small rebound.

Even U.S. Bancorp, which has largely survived the mortgage crisis unscathed, and reports second-quarter results Tuesday, was down 7% recently to $23.93.

The federal government has recently been working weekends — literally — to deal with the banking crisis, and Chip MacDonald, an attorney at law firm Jones Day, said investors should be heartened by the government's efforts.

On Friday, soon after the week's trading ended, federal regulators seized the operations of failing IndyMac. On Sunday, U.S. Treasury Secretary Henry Paulson said his agency would bail out Fannie and Freddie, which together guarantee nearly $5 trillion in American mortgages.

Attorney MacDonald, whose clients include regional banks, said regional bank investors should take heart.

"I would have thought this would have been very positive news for the banks," MacDonald said.

MacDonald points out that many banks hold bonds backed by Freddie and Fannie guarantees. What's more, he says, regionals rely on the two mortgage giants for funding new loans, which means the announced government bailout should leave regional banks on firmer ground.

Furthermore, said MacDonald, the government's seizure of failing institutions not only moves the market "that much closer to the end of the crisis," but also leaves one less competitor for stable banks' business.

"It should help the healthy banks," MacDonald said.

But investors aren't buying the logic.

One reason is that when regulators step in to save institutions, they typically do so at the expense of shareholders. Shares of IndyMac, for example, traded at $1.45 nearly a month ago, but were recently fetching 15 cents.

Of course, shares of Bear Stearns traded at $57 on March 13 — three days before the failing investment bank sold out to JPMorgan Chase & Co. on a Sunday evening.

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