Nine More Banks In Distress- Takes The Total Number Of Failed Banks To 115 In US
The economy may be showing signs of recovery but the days of gloom are far from over for the banking sector with the ghosts of bad loans continuing to haunt the sector. Nine more banks destroyed by bad loans were added to the list of failed banks in US. Including these nine banks as of date there are as many as 115 failed banks in US with analyst foreseeing more bad news in the near future.
Banks that failed last week include BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, Community Bank of Lemont and the Los Angeles-based California National Bank. California National Bank is in fact the fourth-largest US bank failure this year. Among the failed banks it is also one of the largest bank by branches operating as many as 68 branches across Southern California with more than $7 billion in assets. Till date Washington Mutual with an asset base of $307 billion is the largest institution to fail in the current financial crisis.
All the nine banks that were held by FBOP Corp have now been taken over by US Bancorp which has in total has taken up more than $18.4 billion in assets and $15.4 billion of deposits. Distressed banks which were owned by FBOP are being taken over by US Bancorp. FBOP is a private group that owns banks in Texas, Illinois, Arizona and California with a total asset base of over $18 billion.
As of now the distressed banks will continue to operate as normal. However these banks will soon be re-branded US Bank, which is the California-focused unit of US Bancorp. US Bank operates a network of more than 770 branches across Illinois, Arizona and California. The future of employees of these nine banks however is uncertain with no official comment yet on their future.
Like all other banks the problem for these banks started with the recent credit boom that ignited the banks’ appetite to extend loans, many of them were not even properly evaluated with regard to credit worthiness and many of them were poorly underwritten. More banks are in for bad times as the banking industries continue to battle the problem of bad loans that continues to plague the sector. According to Federal Reserve data, as of September banks in total held around $1.7 trillion in commercial real estate loans which amounts to 15 percent of their total asset base. The smaller banks are likely to be impacted more if these loans go bad. The large banks with their well diversified asset base can still survive these hard times.
Other banks that analyst foresee to be in distress are Salt Lake City’s Zions Bancorp, Columbus, Georgia’s Synovus Financial Corp and Dallas-based Comerica Inc. U.S. Bancorp had earlier taken over Downey Savings of Newport Beach and PFF Bank & Trust of Pomona in addition to taking over 20 Nevada branches from BB&T Corp.
