1. Wow, I’m curious Ricardo how does this compare to the banks in NC? Hopefully we are in better shape the IA and LA.

    I’m glad to know you have your finger on this financial pulse.


    1. Terry – since the so called Great Recession began which most economists now agree actually began as early as third quarter of 2006 there have been more than 400 actual bank failures. This doesn’t account for those banks that were able to sell to other banks before being ordered liquidated by the FDIC. Neither does it count the coerced mergers or as like to call the shotgun mergers in the fast and furious days of TARP for example when Sherriff Hank Paulson ordered the merger of National City Bank and PNC, arch rivals who on paper were similar save that PNC had spun off its mortgage unit to Wells Fargo in a Joint Venture in late 2002.

      Since 2007 there have been 412 bank failures. The majority of those bank failures have been concentrated in four states Georgia (76), Florida (60), Illinois (50) and California rounding out the top four with 39 bank failures. When analyzing the information I found it interesting to learn the margin between fourth place California and fifth Place Minnesota was more than 100% with Minnesota having only 17 bank failures!

      By contrast during the same period North Carolina has seen only four bank failures and while on the surface that looks pretty good. However when compared for example to Texas’ 9 failed banks , a state with far more people and deposits it doesn’t look so hot!

      While a majority of the bank failures occurred in 2009 and 2010 this year appears to have been slow down with only 90 failures thus far but that is still a huge number given there wasn’t a single closing in 2006 & 2005 and in 2004 there were only four (4) bank closings the entire year!

      In the Triangle we have a few banks here in our own bank yards that are under written agreements to improve their balance sheets and ebb the flow of their loan losses generally a pre-cursor to being closed. According the Triangle Business Journal, Roughly half of Triangle banks are now dealing with fewer credit troubles than at the close of 2010. The other half are dealing with more. Four Oaks Bank for example is a bank that was established in 1912 is one that has been in trouble all year and in cost cutting move in November closed its Garner branch.

      In 2011 Dodd-Frank Financial Reform Legislation introduced 240 new rules and 59 new federal agencies that financial institutions will have had to learn to conduct profitable business within those rules and agencies and it won’t be easy. Bank of America recently learned just how difficult with its steaming pile of media back-lash they received when announcing they intended to charge $5 per month for customers to use debit cards. This was a real shock to consumers who for the past 15 years had grown accustomed to not paying any fees at all.

      We’ll see what 2012 brings but if I had to guess, I would say the bank failures will slow down, but if 2004 – 2006 only saw 4 failures, and 90 year to date is an improvement of more than 33% I’m hesitant to say that anything less than 60 would be good, but perhaps this is our new normal for the time being!

      Thanks again for the great and thought provoking question.