Trepp revealed that seven banks closed in January, five more than December. In 2011, there were 92 failures, down from both 2010 and 2009 at 157 and 140, respectively.
“The increase in January continues the pattern exhibited over the past few quarters, with a spike in failures in the month immediately following quarter end, and then a drop in the subsequent two months,” Trepp said.
According to the New York-based analytic firm, commercial real estate exposure was the main reason why bank loans failed in January. Nonperforming loans for commercial real estate comprised $363.5 million of the total $487.7 million for the failed banks.
Meanwhile, commercial mortgages made up $24.6 million of the total, with construction and land loans making up $14.9 million. Approximately $36 million of the nonperforming loans were attributed to residential real estate, a little more than 7% of the overall total.
Five out of seven, of the closed banks were located in the Southeast. Both Florida and Tennessee had two failures, while Georgia had one. The other two states that saw banks shut down were Minnesota and Pennsylvania.
Trepp said every bank that failed last month had a risk score of 10, the highest possible ranking. At the end of the fourth quarter, there were 226 banks on the Trepp watchlist deemed to be high risk, and six of the failed banks in January were on this list. The banks that failed last month were on the Trepp watchlist for about 11.5 quarters. For 2011, the median length that banks stayed on the watchlist was eight quarters.
“We expect closures to extend through 2012 and possibly beyond,” Trepp said. “Much will depend on the strength of the economy in general and real estate market conditions in particular.”
