2011 Bank Failures on Track to Reach 100

by devteam December 6th, 2011 | Share

Commercial real estate loans were the principal cause of thernfive bank failures reported in November according to Trepp’s November 2011 U.S.rnBank Failure Report.  These loans comprisedrn80.8 percent of the $160 million in non-performing loans that caused the bankrnfailures in Georgia, Louisiana, Iowa, Nebraska, and Utah.  The majority of the commercial real estaternloans (64.4 percent of the total) were land and construction loans, thernremaining 16.5 percent were commercial mortgages.</p

Delinquent residential real estate loans were the secondaryrncause of distress, representing 10.1 percent of the portfolios at the failedrnbanks; of the remainder 5.4 percent were commercial and industrial loans andrnother loans comprised 3.7 percent.</p

In what Trepp called a pattern, the five failures inrnNovember followed eleven in October.  Thisrnyear there has been a spike in failures in the month immediately following thernend of a quarter and then a drop in the two subsequent months.  Thus far in 2011 90 banks have been closed byrnregulators, an average of 7.5 per month, a pace indicating a total of 100 forrnthe year.  Trepp said it expects the bankrnclosures to extend into 2012 and possibly beyond although this will largelyrndepend on the economy in general and real estate in particular.  </p

The estimated costs to resolve the failed banks (lossrnseverity) fell to 17.5 percent of failed bank assets, down from 22 percent inrnOctober.  Loss-sharing was featured inrnonly one of the five failures during the month. </p

Trepp noted that the banks that failed in November had beenrnon its watchlist for a considerable amount of time – a median of 12 months -rnand all had featured the highest Fail Risk Scores issued by Trepp, a ten.  After the November failures there are 227rnbanks with high Failure Risk Scores remaining on the Trepp Watchlist althoughrnsmaller banks now predominate.  </p

Trepp predicts that there will be a high number of failuresrnin Georgia, Florida, Illinois, Minnesota, North Carolina, and Tennessee inrnupcoming months.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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