Bank Failures Heat Up, Still Well Below Crisis

JUPITER, Florida (April 29, 2013) — Over the past two weeks, regulators have closed five more banks which now double the total failures for the year at 10.  At this rate, 2013 is on pace for 30 bank failures; well behind the total for 2012 at 51 and 92 in 2011.  And, well below the financial crises high reached in 2009 and 2010.

Along with fewer banks failing, the average size of banks that fail has also declined, primarily due to the vulnerability of smaller institutions to withstand loan losses on nonperforming loans.  A total of 63 banks over $1 billion failed since the crises began in 2007.  At the peak of the crises in 2009, 27 banks over $1 billion failed with an average bank failure of $1.21 billion.  In 2013, there were no bank failures over $1 billion with an average failure of $117.8 million.

Of the five newly posted failures, Douglas County Bank, Douglasville, Georgia and Heritage Bank of North Florida, Orange Park, Florida were the largest with total assets of $316.5 million and $110.9 million, respectively.

Florida added two new failures with Georgia, Kentucky and North Carolina adding one each.  Georgia continues to lead the nation with 87 failures followed by Florida with 68, Illinois with 56, California with 39 and Minnesota with 22.  These five states account for almost 57% of the nation’s bank failures since January 2007.

Looking at the last 61 institutions that failed in 2012-13, 100%, were rated E+ or lower (“Very Weak”) by Weiss at the time of failure.  Furthermore, Weiss has identified 151 (99%) of the 153 failed institutions since 2011 as E+ or lower (“Very Weak”).  Weiss currently rates 308 banks “Very Weak” with a rating of E+, E, or E- through December 31, 2012.  Consumers can view the full list at www.weissratings.com. 

Douglas County Bank (DCB) with assets of $316.5 million at December 31, 2012 had been rated E+, E or E- (“Very Weak”) for the last sixteen quarters by Weiss Ratings and was first identified as “Weak” in March 2008.  It reported a loss of $8.8 million through the period ended December 31, 2012.  DCB was well below FDIC-mandated Tier 1 (5%) and risk-based capital ratios (6%) with 0.38% and 1.02%, respectively.  Nonperforming loans represented 12% of its total loan portfolio and its adjusted nonperforming loans to core capital ratio was almost 137%. 

Hamilton State Bank, Hoschton, Georgia with assets of $1.37 billion and a Weiss Rating of B (Good) will assume the deposits of DCB.  Hamilton State Bank has above average Tier 1 Capital of 12.98% and high risk-based capital of 33.03%, compared to industry averages of 9.16% and 15.16%, respectively. The bank has 4.6% of non-performing loans in its portfolio, which is considered almost double the industry average of 2.99%.  And its adjusted non-performing loans to core capital ratio was 13.4%.   It reported net income of $17.87 million through December 31, 2012 and an ROA of 1.30%, above the banking average of 1.04 %.

Heritage Bank of North Florida with assets of $110.8 million at December 31, 2012 had been rated E+, E or E- (“Very Weak”) for the last ten quarters by Weiss Ratings and was first identified as “Weak” in March 2008.  It reported a loss of $1.87 million through the period ended December 31, 2012.  Heritage Bank was well below FDIC-mandated Tier 1 (5%) and risk-based capital ratios (6%) with 1.75% and 3.51%, respectively.  Nonperforming loans represented almost 29% of its total loan portfolio and its adjusted nonperforming loans to core capital ratio was 408%. 

FirstAtlantic Bank, Jacksonville, Florida with assets of $338.8 million and a Weiss Rating of C (Fair) will assume the deposits of Heritage Bank.  FirstAtlantic Bank has above average Tier 1 Capital of 11.58% and risk-based capital of 17.94%, compared to industry averages of 9.16% and 15.16%, respectively. The bank has 3.8% non-performing loans in its portfolio, and 20.6% of non-performing loans to bank core capital, which is considered marginally higher than the industry average of 16.16%.  They reported net income of $1.7 million through December 31, 2012 and an ROA that is half the industry average at 0.54%.

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