U.S. bank failures passes 100 mark for 2009

U.S. bank failures passes 100 mark for 2009


WASHINGTON (Reuters) - The number of U.S. bank failures this year reached 103 on Friday, when regulators closed four more small banks, marking the highest annual level of failed institutions since the savings and loan crisis.

That number is expected to continue rising as the industry tries to get a handle on commercial real estate loans that will continue to deteriorate as more strip malls go vacant and condo developments remain stalled.

The four banks that were shuttered on Friday all had assets under $200 million. The largest bank failure in the current crisis was that of Washington Mutual, which had assets of $307 billion when it was shuttered in September 2008.

Federal Deposit Insurance Corp said the banks that were closed on Friday were Partners Bank in Florida, American United Bank in Georgia, Hillcrest Bank Florida and Flagship Naitonal Bank in Florida.

Those failures brought the number of closings past 100 for the year. There were 25 bank failures in 2008, up from three in 2007.

Banks are still cleaning up their balance sheets from the recent credit boom that fueled banks' appetite to extend loans, many with poor underwriting and triggers that caused borrowers' payments to spike to unaffordable levels.

Community banks, especially, built up high concentrations of commercial real estate loans for developments that have failed to attract tenants or have become vacant.

FDIC Chairman Sheila Bair has said the banking industry's recovery is expected to lag the improvement in the overall economy.

"Some banks continue to face serious challenges but the overwhelming majority will weather this economic storm," Bair said in a video message posted on the agency's website on Friday evening.

Bair told Reuters Washington Summit this week, "Obviously, the pace of bank failures has picked up and it's going to continue into and through next year. But I think it's not nearly where we were during the S&L days." At the peak of the S&L crisis in 1989 534 banks closed.

The four failures are expected to cost the FDIC's insurance fund $176.6 million.

reuters