While the big banks have been getting bailed out, the lifesaver for these smaller banks has been to shut them down and merge them with other institutions.
Mounting loan defaults, especially in commercial real estate is driving these bank failures. We are on pace to break last years number of 140.
The number of bank failures will likely peak this year according to FDIC Chairman Sheila Bair. The number of banks on the FDIC’s “problem” list jumped to 702 in the fourth quarter from 552 three months earlier. Still 33% of the banks reported a net loss for the latest quarter.
The FDIC expects the cost to escalate to $100 billion over the next four years. As these losses have mounted the growing list of bank failures drained the FDIC insurance fund. It fell into the red last year, hitting $20.9 billion deficit as of Dec. 31.
During the savings bank crisis in the 1980’s, there were 747 failed savings banks and they disposed of more than $450 billion in assets. The current crisis has surpassed the total assets of the 80’s, with a smaller number of failures. Leading to the reality, the big will continue to get bigger.
|FDIC Bank Failures|
|Year||# of Failed Banks||Total Assets of Failed Banks||Loss to FDIC DIF|
|2007||3||$ 2,602,500,000.00||$ 113,000,000.00|
|2008||25||$ 373,588,780,000.00||$ 15,708,200,000.00|
|2009||140||$ 170,867,000,000.00||$ 36,432,500,000.00|
|2010||42||$ 23,437,800,000.00||$ 6,640,500,000.00|
|Total||210||$ 570,496,080,000.00||$ 58,894,200,000.00|
The agency mandated last year that the banks prepay around $45 billion in insurance premiums to shore up the FDIC fund, for 2010-2012. The smaller community banks are feeling the pinch of these premiums and its making it more difficult to operate in that environment and provide a profit to their shareholders.