Bank Failures Inch to 15 in 2010 - Analyst Blog

U.S. regulators on Friday shuttered six more banks in California, Georgia, Florida, Minnesota and Washington as the recession continues to take its toll on small banks. This brings the total number of bank failures to 15 so far in 2010, compared to 140 in 2009, 25 in 2008 and 3 in 2007. That is, one bank failure every two days in January 2010.
 
While we expect economic recovery to gain momentum soon, there remains lingering concerns in the banking industry. Failure of both residential and commercial real estate loans as a result of the credit crisis was the primary reason that wounded banks. As the industry tolerates bad loans made during the credit explosion, the trouble in the banking system goes even deeper, increasing the possibility of more bank failures.
 
The failed banks were – Los Angeles-based First Regional Bank with approximately $2.2 billion in assets and $1.9 billion in deposits, Cornelia, Georgia-based Community Bank and Trust with $1.2 billion in assets and $1.1 billion in deposits, Carrollton, Georgia-based First National Bank with $832.6 million in assets and $757.9 million in deposits, Immokalee, Florida-based Florida Community Bank with $875.5 million in assets and $795.5 million in deposits, Hallock, Minnesota-based Marshall Bank with $59.9 million in assets and $54.7 million in deposits and Bainbridge Island, Washington-based American Marine Bank with $373.2 million in assets and $308.5 million in deposits.
 
These bank failures will deal another blow to the Federal Deposit Insurance Corporation’s (FDIC) fund meant for protecting customer accounts, as it has been appointed receiver for these banks. The FDIC insures deposits at 8,195 institutions with roughly $13.5 trillion in assets. When a bank fails, it reimburses customers for deposits of up to $250,000 per account. The outbreak of bank failures has significantly stretched the regulator’s deposit insurance fund. However, the FDIC has access to the Treasury Department’s credit line of up to $500 billion.
 
The six bank failures would cost the federal deposit insurance fund roughly $1.86 billion. The failure of First Regional Bank is expected to cost the federal deposit insurance fund $825.5 million, First National Bank is expected to cost about $260.4 million, Community Bank and Trust is estimated to cost $354.5 million, Florida Community Bank is expected to cost $352.6 million, Marshall Bank is expected to cost about $4.1 million and American Marine Bank is estimated to cost about $58.9 million.
 
Raleigh, North Carolina-based First-Citizens Bank & Trust Co. will assume the deposits and $2.17 billion of the assets of First Regional Bank. Carrollton, Georgia-based Community & Southern Bank agreed to buy the deposits and assets of First National Bank of Georgia, Orangeburg, S.C-based SCBT, N.A will assume the assets and deposits of Community Bank and Trust, Cavalier, N.D.-based United Valley Bank will buy the assets and deposits of Marshall Bank, Miami-based Premier American Bank, N.A. will buy the deposits and $499.1 million of the assets of Florida Community Bank and Tacoma, Washington-based Columbia State Bank is expected to assume the assets and deposits of American Marine Bank.
 
Bank failures started this year with the failure of Bellingham, Washington-based Horizon Bank. Washington Federal Inc. (WFSL) will assume all of the deposits of Horizon Bank. Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years. The FDIC anticipates bank failures to cost about $100 billion over the next three years.
 
The failure of Washington Mutual in 2008 was the largest in U.S. banking history. It was acquired by JP Morgan Chase (JPM). The other major acquirers of failed institutions since 2008 include Fifth Third Bancorp (FITB), U.S. Bancorp (USB), Zions Bancorp (ZION), SunTrust Banks (STI), PNC Financial (PNC), BB&T Corporation (BBT) and Regions Financial (RF).
 
Though current signals indicate that the economy may stabilize, we expect loan losses on the commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans.
Read the full analyst report on "WFSL"
Read the full analyst report on "JPM"
Read the full analyst report on "FITB"
Read the full analyst report on "USB"
Read the full analyst report on "ZION"
Read the full analyst report on "STI"
Read the full analyst report on "PNC"
Read the full analyst report on "BBT"
Read the full analyst report on "RF"
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