NEW YORK CITY — Five banks in the United States failed in November, according to Trepp’s November 2011 U.S. Bank Failure Report. In October, 11 banks failed, and six banks failed in September. This brings the total failures so far for 2011 to 90 banks, and Trepp anticipates that number will stay just under 100 banks as the year comes to a close.
“The drop in November (vs. October) is part of a pattern we have seen in 2011, with a spike in failures in the first month after the end of a quarter, followed by a lower volume in the following two months,” says Matthew Anderson, managing director of New York-based Trepp.
Anderson continues, “The uptick after the end of the quarter is likely related to the quarterly reporting cycle. Each quarter, FDIC-insured banks file quarterly condition reports (“call reports”) with the bank regulators. Those reports give the regulators a fresh update on the condition of the banks, and for the troubled banks especially, a perspective on whether the bank is improving or worsening.”
The largest failure in November was Central Progressive Bank in Louisiana with $383 million in total assets. Community Bank of Rockmart failed in Georgia, which is the state that ranks first for failures in 2011 with a total of 23. Additional failures included Polk County Bank in Iowa, Mid City Bank in Nebraska and SunFirst Bank in Utah.
Similar to October, commercial real estate loans were the main driver for failed banks in November. Of the $160 million of non-performing loans at failed banks, commercial real estate loans accounted for $129 million, or 80.8 percent. Of the $129 million, $103 million came from construction and land loans, and commercial mortgages made up the remaining $26 million.
Anderson says Trepp still has approximately 230 banks on the Trepp Watchlist, but he adds that they may not all fail. For the five banks that failed in November, the median length on the Watchlist was 12 quarters. Two of the five failed banks in November, Community Bank of Rockmart and Mid City Bank, were on the Watchlist for eight quarters. In contrast, Central Progressive Bank and Polk County Bank were both listed for 12 quarters.
For the coming year, Anderson projects failures to range between 75 and 100. However, he adds there is potential for continued bank failures in 2012 and 2013.
“The largest and most severe problems have mainly been dealt with already,” he says. “Regulators are now working through smaller banks that were not as distressed, at least earlier on in the cycle. One important factor is how open (or closed) the capital markets are. Banks were generally able to raise capital in 2010 and the first half of 2011. Since the summer, with the U.S. and European economic concerns, capital markets have been less open, so banks could have a tougher time of raising capital in the next several months.”
— Savannah Duncan