Another four banks failed and fell into the hands of the FDIC last Friday, bringing the 2009 tally to 13 in just one and a half months.
The cost of the four failures carried a tab of nearly $350 million, further depleting the FDIC’s Deposit Insurance Fund (DIF), which fell to $34.6 billion as of the end of the third quarter, down from $45.6 billion a quarter earlier.
The latest failures included Pinnacle Bank of Oregon, Corn Belt Bank and Trust Co., Riverside Bank of the Gulf Coast, and Sherman County Bank.
While not notable names, the volume of bank failures alone may put the FDIC in a precarious position, despite doubling premiums in mid-December to bolster its reserves.
The FDIC recently raised estimates for the cost of bank failures to more than $40 billion through 2013.
Last week, RBC analyst Gerard Cassidy told Bloomberg he expected 1,000 bank failures over the next 3-5 years (just 40 were seized between 2003-2008).
He previously estimated a number closer to 300, highlighting the severity of the ongoing mortgage crisis, which seems to be constantly deteriorating.
RBC uses the so-called Texas ratio to determine the health of banking institutions.
In the past, banks have failed when their ratio climbs above 100 percent, that is, when dividing the value of their non-performing loans by the sum of their tangible capital and loan loss reverses reaches 1:1.
Two of the nation’s largest 50 banks, Sterling Financial Corp. and Colonial BancGroup., have ratios in excess of 50 percent.
Bank of America has a Texas ratio of 21.6 percent, and Citigroup is close behind at 18.4 percent, while Chase is sitting pretty at just 5.6 percent.
As of September 30, the FDIC identified 171 problem thrifts, up from 117 at the end of the second quarter. And it’s sure to keep rising.
(photo: nima)