WASHINGTON (Reuters) - Three U.S. banks failed on Friday, bringing the total to 98 this year, as regulators continue to shutter financial institutions that are overwhelmed by bad loans and liquidity problems.

The Federal Deposit Insurance Corp said that Warren Bank in Michigan was closed, with Huntington National Bank of Ohio taking over its deposits. It had $538 million in assets and $501 million in deposits.

Jennings State Bank in Minnesota was also shut down, with Central Bank in that state assuming its deposits. It had $56.3 million in assets and $52.4 million in deposits.

The third bank closed by bank regulators was Southern Colorado National Bank, with Legacy Bank in the state taking over its deposits. It had $39.5 million in assets and $31.9 million in deposits.

All the branches of the institutions will open on Saturday under their new owners and customers can continue to use checks, automated tellers and debit cards to access their funds.

Combined, the three latest failures are expected to cost the FDIC's insurance fund a total of about $293 million.

Earlier this week the FDIC took steps aimed at shoring up the depleted insurance fund by proposing that banks prepay three years of their regular assessments.

The insurance fund's balance dipped negative as of this week, as a spike in bank failures have been draining the FDIC's resources. The agency said it expects the total bill for bank failures to come to $100 billion from 2009 through 2013.

The prepayment of assessments will give the FDIC an additional $45 billion in liquidity, and was seen as an attractive alternative to charging banks a hefty special fee.

Banks will prepay the assessments at the end of this year, but not have to recognize the fees as an expense on their books until they are normally due.

The FDIC insures accounts up to $250,000, and notes that those deposits are fully protected, despite a negative insurance fund balance.

The agency also has the option of tapping a $500 billion line of credit with the U.S. Treasury. It last borrowed from Treasury during the savings and loan crisis of the late 1980s and early 1990s.

The FDIC said it expects failures to peak in 2009 and 2010, and that industry earnings will recover in 2011. Chairman Sheila Bair has said failures are a lagging indicator, and that the banking industry will continue to suffer, even as the economy shows encouraging signs of healing.

(Reporting by Karey Wutkowski and Jeremy Pelofsky; Editing by Richard Chang)