Colonial Bank became the biggest bank failure this year, the 6th biggest of all time, and the largest since Washington Mutual, as the FDIC took over the company on Friday, according to an article written by Alison Vekshin, David Mildenberg and Dakin Campbell in Bloomberg.com

Additionally, four more banks were taken over this weekend, bringing the total this year to 77.

This is more than triple the number of bank failures that we saw in 2008 when there were only 25, and we still have over four months left to the year.

The reason why the number of bank failures are escalating is because of the number of non-performing assets on their balance sheets are exploding.  With all of the talk about a housing bottom, what continues to be overlooked is that the number of loan defaults are rising, and they are rising at a greater pace than the demand for real estate is.

And these losses are not just isolated to smaller community banks, both Bank of America and Wells Fargo have been hit by massive surges in the amount of non-performing loans during their recent quarterly earnings reports.  Wells Fargo showed a 45% increase in non-performing assets when compared to the first quarter.  Bank of America's non-performing assets jumped 21% from the first quarter.   

Additionally, according to RealtyTrac, foreclosure filings set a new record in July as they rose 32% from the previous year.

The banking crisis is ongoing to do falling values in both residential and commercial real estate.  In the absence of strong demand for these assets, values will continue to fall for the next two to three years putting even more pressure on the banking system and broader economy.