Bank Failures, 2009 Edition: Three and Counting

2009 is less than one month old, yet there are already a few banks being closed, picking up what was left from last year. A total of 25 banks were shut down in 2008. So far in 2009, three have gone under already:

• National Bank of Commerce, Berkeley, IL: Closed on January 16, 2009, assets at close $430.9 million, deposits at close $402.1 million. National Bank of Commerce’s deposits were acquired by Republic Bank of Chicago.
• Bank of Clark County, Vancouver, WA: Closed on January 16, 2009, assets at close $466.5 million, deposits at close $366.5 million. Insured deposits were acquired by Umpqua Bank, Roseburg, Oregon.
• 1st Centennial Bank, Redlands, CA: Closed on January 23, 2009, assets at close $803.3 million, deposit at close $676.9 million. Insured deposits were acquired by First California Bank, Westlake Village, California.

During the same period last year, only one bank was closed. If the trend continues, the total number of bank failures this year will surely exceed that of 2008.

Comments

[GloomBoom.com:]

2009 will be a bumper year for bank closings. Stay out of equities and buy gold.

Jan 24 02:11 PM

[Sentinel:]

Right on GloomBoom.

We know that the top 20 banks in this country are either actually insolvent or technically insolvent.

The same is true in England.

Now comes the REGIONALS!

They were pretty much spared the brunt of the toxic mortgage disaster. However, because they couldn't compete effectively with the big banks they decided to jump whole hog into the Commercial Real Estate (CRE) market.

Well....now that we are in the Great Recession and will be into a Depression by the first of 2010, all the corporate bankruptcies, particularly in retail, and all the layoffs will have a devastating effect on corporate and commercial real estate.

Plus here's another fly in the ointment. The Big Banks which we know have marked to market just a FRACTION of their toxic derivatives have another secret.......

GHOST INVENTORY. That's right. They have only just listed a fraction of the houses they own due to foreclosure. You think the housing market is bad now, just wait until transparency rules under Obama come into play during the run-up to nationalization really forces the banks to show just how many empty houses they own.

Talk about equity destruction and housing devaluation!

Just in time for the CRE crash, not to mention the Alt-A tsunami which is coming this year and for the next 2-3 years.

Jan 24 02:53 PM

[klarsolo:]

You guys do know that in the S&L crisis hundreds of banks failed? It was like a banking failure every day.

Jan 24 03:08 PM

[The Good Ne...:]

Excellent point klarsolo...

In fact let's look at the *rate* of bank failures. It has actually slowed since the big chill back in October and November when it peaked at about 5 banks per month.

Then 3 Banks in December

and now only 3 Banks in January

I'd say this is a quite calm rate of failure.

With respect to most regionals they are doing just fine... In fact have a close look at the regionals and you will see that they are a quite strong and well capitalized, bunch.

Take a look at these 5 that have just flat out refused TARP funding...
mast-economy.blogspot....

I'd like to transplant their management teams to our top 5 banks.
gne

Jan 24 03:54 PM

[Fliujniligui:]

These are nano-banks or what? A Bank of Portland City would be bigger than one billion of assets. What is that, are these banks run in a garage by teenagers ?

Jan 24 05:58 PM

[BxCapricorn:]

I'm actually surprised where we are right now. When I ran the screener on Bankrate.com in July 2008, to generate the "one star" doomed for failure list in CA, FL, NV, and CO, I had close to 50 bank candidates and so far only a dozen or so have succumbed to the inevitable. This is the most orderly collapse I have even seen. The S&L crisis was far worse. I know that everyone wants to point out that Americans have "no savings", but if you've seen that number recently, you would have to concede that the average American has taken action, and is definitely hoarding their cash. Although the doom-sayers are everywhere, especially on SA, I really expected more carnage. Let's just wait for a magic number like 50 banks, before making bold predictions for the end of the financial world, as we know it. It's easy to blame the banks for their distress, but let's face it, Congress wanted banks to provide homes to low-income families, passed legislation accordingly, and when things got rough, FAS 157 was enacted, completely changing the rules of the game. You can mock their models all you like, but the variables were changed on them, setting them up for failure. When I talk about banks, I'm talking regionals, and community banks, headed by real management teams with a vested interest in their communities, not the American Psychos on Wall Street and their $42M Zen gardens (C) and Thain....

Jan 24 06:45 PM

[Sentinel:]

Well, all you Cornucopians who poo-poo the danger the Regional Banks are facing are similar to a bunch of civilians who attending a nuclear test in the desert of Nevada would have said something like this.......

<Nuclear Explosion Occurs>

Dave: "Well Bob, that certainly was a blinding flash and Whoah Boy look at that mushroom cloud!

Bob: "Yeah Dave, I don't know what all the hullaballoo was about, I didn't even hear the Ka-bo.....

<WWWHHHHHHIOOOOOMMM... >
ARRGGHHHH!!!!! Oh SSHHH!!!!!!!TTTTTT!!!!

What you guys fail to understand (and its a very similar situation to the Twin Towers collapse) is the magnitude of this disaster. It is going to take some time to ripple through the system.

Yeah you see the nuclear explosion from afar......you see the damage in the Twin Towers. But this financial disaster is MUCH more widespread and systemic than the S&L's ever was. That was a grassfire on a small patch of prairie that burned itself out pretty quickly compared to this.

But... go ahead. If you think the Regionals are all that great then dump your money into them......

Should be a great investment. Right?

Jan 24 07:31 PM

[NC Trader:]

The reason more banks have not been closed is simply that the FDIC is overwhelmed. There are more than 30 banks with negative capital ratios, not to mentioned hundreds critically undercapitalized. Quick list-
OneUnited
Omni National
Home Federal
Harbor Bank of Maryland
Texas National
Bank Atlantic

Jan 24 08:23 PM

[Moon Kil Woong:]

All these banks are nothing in terms of the cost to clean up compared to one big bank like BoA or Citibank, which by any description are failures. There in lies the biggest risk and why we are pouring tons of money down a toilet. Add GMAC, AIG, and ythe slew of other beggar companies and you see the really ugly picture.

The S&L crisis was bad but could be handled. The financial problems today dwarf that. Sadly, it was largely of their own making and no one is getting punished for it aside from the general public, taxpayers, and shareholders. Where is executive responsibility in all of this and what are the Board of Directors doing?

Jan 24 10:17 PM

[Jim Hawthorne:]

The numbers facing some our largest banks (BAC, JPM, COF) are symptomatic of insolvency.

Some big banks are going to fail, and the nationalization steamroller will roll on.

The disaster we face today dwarfs those of past financial 'crises'. We are in deep doo-doo, and the struggle we all face is daunting.

Be nimble, keep your powder dry, and be prepared for anything! This, too, will one day end!

Jan 25 12:00 AM

[KJP712:]

Also thought the bank failure rates would be higher than they are.Why are more banks not failing ?

Jan 25 12:44 AM

[donzelion:]

Why aren't more banks failing? Mainly because the mega-banks have effectively "commoditized" financial services - selling financial products rather than offering services to customers and accountholders. By commoditizing the financial industry, the mega-banks took on all the risk - and hence, the smaller banks weren't even allowed to feed at those troughs.

The regionals will only start to fail once the risks percolate through the system - they'll be indirect casualties of the excesses brought on by commoditized banking. But make no mistake: they will be victims, unless you believe the regionals are MORE decoupled from the national economy than China, India, and the emerging markets have proven to be.

Jan 25 03:08 AM

[a. palmer jr.:]

In answer to one of the above: A bank in a garage run by teenagers would have probably been run smarter than Citi bank, Bank of America, AIG, Lehman, etc.

Jan 25 06:12 PM

[Crocodilian:]

On Jan 25 03:08 AM donzelion wrote:

> Why aren't more banks failing? Mainly because the mega-banks have
> effectively "commoditized" financial services - selling financial
> products rather than offering services to customers and accountholders.
> By commoditizing the financial industry, the mega-banks took on all
> the risk - and hence, the smaller banks weren't even allowed to feed
> at those troughs.
>
> The regionals will only start to fail once the risks percolate through
> the system - they'll be indirect casualties of the excesses brought
> on by commoditized banking. But make no mistake: they will be victims,
> unless you believe the regionals are MORE decoupled from the national
> economy than China, India, and the emerging markets have proven to
> be.

That's a good argument.

I'd add that the mortgage and credit securitization business means that some banks simply served as conduits of credit, but kept very little of it on their own books, eg: a local bank that sold all their car loans and conforming mortgage loans on to the markets to be packaged as CDOs and Agency MBS might end up with very little direct risk on their balance sheet.

many of these banks ran their businesses to create income, rather than to increase their own balance sheets. By this logic, we may have already created our "bad banks" -- they're Citi and Bank of America, Fannie and Freddie, the de facto aggregators of bad risk from everywhere else.

By that logic, local and regional banks are more likely to be hit by declines in income than by massive bad assets.

Jan 27 06:55 AM

[The Good Ne...:]

donzelion
>The regionals will only start to fail once the risks percolate
>through the system - they'll be indirect casualties of the
>excesses brought on by commoditized banking. But make
>no mistake: they will be victims, unless you believe the
>regionals are MORE decoupled from the national economy
>than China, India, and the emerging markets have proven to be.

The regional banks are not decoupled. But if you examine their balance sheets you'll see that they continue to do "banking," not offer stupid financial service clusters in order to manipulate higher returns.

What specific "risks" do you see percolating into the regionals? I respectfully disagree. They will not touch any of that toxic stuff... especially not now....

gne
goodnewseconomist.com

Jan 29 03:18 PM

[BxCapricorn:]

Wow. This weekend, 2/20/09, another small bank failed. This sure is scary. Thank goodness there was another bank, in their county, that could pick up their deposits.

www.fdic.gov/bank/indi...

At this rate we'll surpass the Savings & Loan shutdown rate sometime next century. There will come a time when the financial doomsayers will simply look ridiculous, and hopefully that time will be by year end, as we end a two-year, hard recession, and gradually make a turn. Hardly worth the media's attention, but I'm sure they will over-react as they always do.

Feb 21 01:24 PM

[pravin404:]

2 banks failed on Good Friday, "Cape Fear Bank, Wilmington, NC " and "New Frontier Bank, Greeley, CO".

This makes 23 bank fails this year and 48 from start of year 2008.

Cape Fear Bank was the first bank from North Carolina to fail while New Frontier Bank becomes the second bank to fail from Colorado this year.

Nobody know how many more banks are going to fail. Prediction is in hundreds of bank.

I found list of failed banks and the map of where the banks are failing on portalseven.com
The page locations are :

Map of failed banks : portalseven.com/financ...

List of banks failed in 2009 : portalseven.com/Failed...

Do check it.

Pravin

Apr 12 10:27 AM