WASHINGTON, D.C. — Six U.S. banks failed in September, raising the total to 74 for the year and putting the banking sector on a pace for nearly 100 failures for all of 2011, according to the Federal Deposit Insurance Corp. and New York-based Trepp LLC.
The failed banks include First International Bank in Texas, Citizens Bank of Northern California, Bank of the Commonwealth in Virginia, First National Bank of Florida, CreekSide Bank in Georgia, and Patriot Bank of Georgia (see below).
Georgia has the highest count of bank failures, with 19 year-to-date in 2011 and 71 since the current cycle began in late 2007. Florida ranks second for bank failures, with 11 year-to-date in 2011 and 56 in the current cycle.
The closure in Texas was the first since early 2010. For a state with a large number of banks, Texas has had relatively few failures — nine in the current cycle.
Commercial real estate exposure was the main driver behind problem loans for the banks that failed in September. Commercial real estate loans accounted for $365 million, or 82 percent, of the total $445 million in nonperforming loans at the failed banks.
Commercial mortgages made up $199 million (45 percent) of the total, while construction and land loans comprised $166 million (37 percent) of the total nonperforming pool.
The residential real estate loan category was a secondary source of distress, with $61 million in nonperforming loans, or 14 percent of the total nonperforming balance, according to Trepp.
The remainder was comprised of commercial and industrial loans ($18 million, 4 percent of the total) and consumer and other loans ($2 million, less than 1 percent of the total).
The September failures had all been on Trepp’s watch list for a considerable amount of time prior to failure. The median length on the watch list was 10.5 quarters, ranging from six to 12 quarters. There are still 238 banks on the Trepp watch list that are at risk of failing. See below for historical closings dating to July 2010.
The loss severity rose in September, with the estimated costs to resolve the failed banks rising to 23 percent of failed bank assets — up from 20 percent in August. The September figure is still below the 25 percent and 26 percent figures realized in May and June. The loss severity in September ranged from 13 percent (Citizens Bank of Northern California) to 29 percent (Patriot Bank of Georgia).
— Matt Valley