Bank Failures Update And Future Problem Banks

A few weeks ago, in Bank
Failures in Historical Perspective, I noted that the total number of FDIC
bank closures for the year was at 57, putting us on pace for close to 100 FDIC
bank closures for 2009.  In the
intervening weeks, the FDIC has closed more banks, bringing the total for the
year to 72.  See here for the
FDIC's full list of failed banks since October 1, 2000.  Moreover, the pace of failures has increased
in recent weeks, moving the anticipated number of FDIC bank closures closer to
125-150 for 2009 if the current pace continues. (See the chart at right, which does not include this Friday's three bank closures, courtesy
of Calculated
Risk).  Click on any chart to enlarge.

As a reminder, although this year’s bank failures are
nothing to feel good about, it’s helpful to put today’s FDIC closures in
historical perspective.  As
shown in the chart at right, once again, courtesy of Calculated
Risk, bank closures were far more numerous during
both the Savings & Loan Crisis and during the 1920s and early 1930s, before
the FDIC was created in 1933.  For
example, the number of bank failures is estimated at 4000 for the year 1933, and
500 bank failures per year was commonly seen during the 1920’s.

Of course, the number of banks isn't the only relevant
measure of distress from bank failures. Many banks today have more branches,
and far more assets and deposits. 
Nor do bank closures paint the whole picture of economic crisis – in the
current financial crisis, many of the most spectacular failures or bailouts
have been of non-bank financial institutions.  (For those interested, there is some discussion in the
comments to this prior
post of other potential measures).

Calculated Risk also has an unofficial list of “problem
banks,” “compiled from regulator press releases or from public news
sources.”  However, my unsystematic
perusal suggests to me that nearly every bank on the list has a link to an
official enforcement action or agreement of some type. 

Not all banks closed by the FDIC make it first onto the
problem list.  For example, I spot
two of the three banks closed on Friday – Community First
Bank, Prineville, Oregon; and Community National
Bank of Sarasota County, Venice, Florida; but not First State Bank,
Sarasota, Florida — on the list. 
According to CR, in the comments:

not all failures are on the list. There are two possible
reasons: 1) the FDIC is slow to release the formal agreements, or 2) the bank
is seized without ever receiving a [formal] warning. Option
2 happened a number of times last year, but my understanding is they are trying
to change the process and have a formal warning first.

I’m sure there will be more developments on the bank failure
front still to come.  Stay
tuned. 

Related Post: Bank
Failures in Historical Perspective