NEW YORK CITY — Four banks in the U.S. failed in February, down from seven failures in January, according to New York City-based Trepp LLC. The decrease follows a pattern observed in 2011: a spike in failures in the month immediately following the end of a quarter, then a drop in subsequent months.
Three of the failures occurred in Midwestern states, with the fourth bank failure in the South. The largest failure was Home Savings of America, with $434.1 million in total assets, which brings Minnesota’s total failures to 19 since late 2007. Additional failures in the Midwest included Charter National Bank and Trust in Illinois and SCB Bank in Indiana.
The second largest failure was the Central Bank of Georgia, with $278.9 million in total assets. Georgia ranks first for failures, with 77 since September 2007. Year-to-date, Georgia has recorded two failures.
Similar to last year, commercial real estate loans were the main driver behind problem loans for banks that failed in February. Of the $122.5 million in nonperforming loans at failed banks, commercial real estate loans account for $50.1 million, or 69.8 percent. Of the $50.1 million, commercial mortgages comprised $33.1 million and construction and land loans accounted for $17 million.
As of the fourth quarter of 2011, 230 banks were on the Trepp Watchlist, which tracks those banks at an elevated risk of failure. So far, eight have failed and one was acquired. Currently, there are 221 still on the list. For the four banks that failed in February, the median length on the Watchlist was 11 quarters. For 2012 year-to-date, the total average length is 11.5 quarters, an increase from eight quarters in 2011.
Among the high-risk banks on the Watchlist, there are 43 in Georgia, 43 in Florida, 26 in Illinois, 14 in Minnesota, 11 in Tennessee and 11 in North Carolina.
Trepp says that 2012 should continue to follow the pattern observed in 2011. March will be similar to February, with four or five failures anticipated, followed by a spike in April, which is a quarterly reporting month.
The firm anticipates a moderate pace of closures in 2012 compared to 2011, which posted 92 total failures. However, the slower pace of closures will likely mean failures will continue into 2013.
— Savannah Duncan