Last week, regulators shut nine banks owned by holding company FBOP Corp. It was a new milestone: nine was the highest number of banks closed in a day since the financial crisis began taking down banks last year. Minneapolis-based US Bancorp bought the deposits and most of the assets of the banks, which included two others in California, three in Texas, two in Illinois and one in Arizona.
Banks have been especially hurt by failed real estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.
If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks, especially, hold large concentrations of these loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.
The 120 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $27 billion so far this year, and hundreds more bank failures are expected to raise the cost to around $100 billion through 2013.
The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end of June from 305 in the first quarter. That's the most since June 1994. About 13 percent of banks on the list generally end up failing, according to the FDIC.