US Bank Closings

2007 - 3
2008 - 25 (more than in the previous five years combined)
2009 - 74, the most since 1992 (122). It's only August.

Bank closures typically take place on Fridays, and this past Friday was no exception. Colonial Bank was the latest bank to fall, and it was the biggest failure this year.

The FDIC’s list of “troubled banks” stood at 305 at the end of the first quarter, the latest data available.

On August 14, Bloomberg News reported that more than 150 publicly traded U.S. lenders had nonperforming loans above 5% of their total holdings. Former regulators say that this is the level that can wipe out a bank's equity and threaten its survival.

Last September, Christopher Whalen, managing director of Institutional Risk Analytics, which sells its analysis of FDIC data to investors, predicted that 100 U.S. banks would fail by the end of 2009. The current pace of closures could easily surpass that.

By the end of 2008, the FDIC expected bank failures to cost its insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. However, its problems have grown continually worse.

As of March 31, the FDIC had $13 billion to cover $4.83 trillion in deposits. Does that make you feel insured?

The August 14th failure of Colonial Bank (the biggest failure this year) will deplete the FDIC’s deposit insurance fund by $2.8 billion, the agency said.

So far, failures this year have cost the insurance fund nearly $18 billion.

Think about that: $13 billion in assets, $18 billion in losses. Does that make any sense? It seems that the FDIC's insurance fund is already broke.

History and context:

- In 1930, 1300+ banks failed, 600 in just the final two months of the year.

- During the savings-and-loan crisis (1986-95), 2,377 banks failed.

- In 1989, 534 banks were closed, the most since 1934.

- According to the FDIC, since 1934, the only two years with no bank failures were 2005 and 2006.

- From 2000=2007, only 32 US banks failed.