42nd US bank failure in 2010

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.

6 Troubled Credit Unions Merging

The NCUA (National Credit Union Administration) has approved the following:

First State Federal Credit Union in Dover, Del, a $13 Million-asset CU, and $11 million-asset Community Federal Credit Union in Tacoma, Wash.

1. First State is combining with American Spirit Federal CU, which had three straight years of losses.
2. Community is combining with TwinStar CU which reported a $1.1 million loss in 09.
3. Specialty Federal CU in Ft. Wayne, IN; Bell Financial Community Federal CU a $5 million-asset CU in Bourbannais, IL; Bramco Employees Federal CU a $1 million-asset CU in Louisville, Ky; and a small credit union in Monrow, CT, Miracle Faith Federal CU.

The tip of the iceberg, stay tuned.