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New Bank Closures Announced

Reuters just reported that two more banks were closed today. Image of money we trust Neither close to the size of IndyMac Bank. This is 7 bank failures this year. The two banks that were closed were immediately sold to Mutual of Omaha bank.

The reported number of troubled banks, as of March 08, is 90. The Rueters article indicates that regulators are expecting additional insolvencies this year. The troubled bank list is expected to be updated next month.

If I am reading the report correctly, this is the most bank failures since 2002, and equals the total number of failures in the 4 years from 2004 to 2007 combined. Of course the failures are not even close to the totals in the early 90's when nearly a thousand banks failed in a 4 year period.

The two banks First National Bank of Nevada and First Heritage Bank NA of California were described as undercapitilized. Heritage was severely undercapitized. Both were in states hard hit by the mortgage lending crisis, although the Reuters article and various other news reports did not indicate that the insolvencies were specifically mortgage related.

Most certainly, the closings were planned well in advance for this immediate sale to Mutual of Omaha Bank to have already been negotiated and so quickly finalized.

I just wonder how many more troubled banks will be taken over. Are these problems caused by the mortgage crisis, or are these bank failures and the mortgage crisis the result of deeper economic problems?

Are these issues primarily regional?

Richard Smith
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

Posted by Richard Smith Mortgages Home Loans FHA TN GA AL on 07/26/2008 02:10 PM

Comments (12)

fdic, bank failures

Originally posted at: Richard's Real Estate Thoughts: New Bank Closures Announced

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12 Comments on New Bank Closures Announced

JUL

2008

Richard

Currently there are one hundred and eleven banks on the feds watch list. They are banks the have more liabilities then assets.

Good luck and success

Lou Ludwig

Lou,

Thanks for that update. I would have thought that the April - June figures would be on the FDIC site by now. Where did you get that update.

I really wish the number had not increased so much. The 111 number is more than doubled since 2006.

Any idea if there are regional concentrations?

Thanks,

Richard

The link is no longer active but I copied this from a article run in March from the Chicago Tribune as part of some research . Talk about being proactive!

March 26, 2008

Federal regulators, anticipating a surge in troubled financial institutions, will boost by more than 60 percent the number of workers who handle bank failures.

The Federal Deposit Insurance Corp. wants to add 140 workers to bring staff levels to 360 workers in the division that handles bank failures, John Bovenzi, the agency's chief operating officer, said Tuesday.

"We want to make sure that we're prepared," Bovenzi said, adding that most of the hires will be temporary and based in Dallas.

There have been five bank failures since February 2007, following an uneventful stretch of more than two years. The last time the agency was hit hard with failures was during the 1990-91 recession, when 502 banks failed in three years.

Analysts see casualties rising but don't believe they will reach that level. Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, projects 150 bank failures over the next three years.

Richard,

I have been watching the bank closures with interest and have to tell you that we had the same thing happen in Texas from 1988-1992, They used to hand out a sheet of paper with a long list on the left hand side of the page, as more manks closed were merged or taken over ther would be a shorter column to the right and on and on. It was a pretty miserable time and I hope we don't have it as bad this time but thing s are definately not good in the near future.

Thanks - Russell

doesn't look like much of a problem.

these institutions were small players.

Richard: I expect there are more. Most will be small players although I think there will also be alot of mergers (think Key Bank, WaMu. etc.). Since the banks are closing and having difficulty due to holding bad mortgage loansw I would say this is the problem. Have a nice day!

Paul

JUL

2008

Mary,

Thanks for that bit of information. I guess they are following closely. They certainly acted quickly to remedy the Heritage and First National Bk situation. I think Indymac happened suddenly because published comments caused a two week long run on the bank.

Maybe the speed demonstrated this week to have a ready buyer is a good sign that the situation is being properly handled.

Richard

Russell,

The bank failures during the late 80's and early 90's dwarf the present threat. But the concern to me is how quickly the troubled bank list is growing.

I was wondering if the problem is regional or more widespread, and if it is generally attributed to mortgage related issues or to more broad economic issues.

Richard

Jay,

The specific banks that closed are only a problem if the rising number of troubled banks is a continuing trend. At a minimum it can impact consumer confidence, if it does not indicate a more pervasive liquidity problem that Mike Mueller referenced in a couple posts.

Richard

Paul,

Someone told me last week that we might end up with 3 national banks. Is that not a bit scary. Do you really think these bank failures are primarily from mortgage defaults?

I just have not read that anywhere. IndyMac struggled with mortgage related losses and responded operationally, but the bank closed because of a two run on assets. At least that is how I have understood the events.

Do you think Heritage and First National Bank of Nevada closed because of specifically mortgage lossses?

Richard

The Federal Reserve OTS just increased the bank closure staff by 140 persons in the last few months. Get used to it, it is going to be a trend. They always do it over a weekend.

JUL

2008

Jim,

Thank you for visiting this post. The regulators have convinced me that they know the realities. The fact that they are getting prepared for additional failures, tell me that we are going to have additional failures.

Even small players make a big impact when the numbers add up - consumer confidence, insurance fund, actual losses. To me it brings concerns about the general state of the economy.

It does not look like the real estate industry will be strong enough to turn the economy, like earlier in the decade. Is there any sector that is in a position to drive the economy?

Richard

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