Regulators closed three banks in three different states, as loan losses continue to plague the banking industry. Efforts by small banks to raise additional capital have become increasing difficult due to low loan demand, a slowing economy and investor antipathy towards banking stocks. The latest three banking failures in Tennessee, Georgia and Florida bring total bank failures for 2012 to 31.
Although the pace of banking failures has slowed compared to 2011, the number of Problem Banks remains elevated at 772. Approximately 10.5% of all banking institutions remain on the confidential FDIC Problem Bank List, a not inconsequential amount, especially when considering that the banking crisis began four years ago.
The historic low for the Problem Bank List was recorded in 2006 with only 47 banks. A mere two years later, the entire banking system of the United States was on the verge of collapse and had to be rescued by the Federal Reserve which pumped trillions of dollars into the banking and financial system to avoid a systemic collapse.
The three banks that failed for the week ending June 15, 2012 had total assets of $484.4 million and resulted in losses to the FDIC Deposit Insurance Fund of $100 million. One of the failed banks that was closed this week had been in operation since 1888.
Listed below are the three bank failures for the week ending June 15, 2012. Please click on the link for detailed information on each bank closing.
Putnam State Bank grew rapidly as real estate prices reached bubble levels in Florida before abruptly collapsing. With total assets of $169.5 million, Putnam State Bank was the largest bank failure of the week.
Security Exchange had only been in business for 12 years before collapsing under the weight of defaulted loans. Regulators should be explaining why they took so long before closing this critically undercapitalized bank.
The Farmers Bank was founded in 1888 and was able to survive depressions, world wars and financial panics. The “Great Recession” that we are currently in, however, proved to be too much for the bank to handle and state regulators were forced to close the bank.