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Six banks were closed by the Federal Deposit Insurance Corporation (FDIC) in September for a total of 74 in the year to date according to information released today by Trepp, LLC which provides CMBS and commercial mortgage information, to the financial services industry. This was a slight improvement over August when seven banks failed.

At the current pace the Corporation will close 100 banks in 2011. This projected level of bank failures, an average of 8.2 per month, will be well below the 160 banks the FDIC closed due to insolvency in 2010 or the 139 that failed in 2009.

According to Trepp, loans tied to real estate were virtually the sole source of the failures. Commercial real estate loans (CRE) accounted for $365 million (82 percent) of the $445 million in nonperforming loans at the failed banks. Within that category $199 million or 45 percent of the total were commercial mortgages and $166 million or 37 percent were land and construction loans.

Residential real estate loans were a distant second as the causative factor, with $61 million nonperforming loans or 14 percent of the total nonperforming balance. Commercial and industrial loans (C&I) accounted for $18 million or 4 percent of the nonperforming total and consumer and other loans represented $2 million or less than 1 percent of the total.

Georgia was home to two of the newly failed banks. That brings the total year-to-date failures in the state to 19. More banks have failed in Georgia than in any other state; 71 since the current round of bank failures started at the end of 2007. The other September closings were in Florida, Virginia, California, and Texas. The second largest number of bank failures has been in Florida with 11 so far this year and 56 since the start of the recession. Between 2000 and the end of 2007 there were a total of 27 banks closed by the FDIC because of insolvency. Since the beginning of 2008 over 400 banks have failed.

The loss severity was higher in September; the estimated cost to resolve the failed banks was 23 percent of the failed bank’s assets compared to 20 percent in August. The loss severity numbers ranged from 13 percent for Citizens Bank of Northern California to 29 percent for Patriot Bank of Georgia.

Trepp maintains a watch list of trouble banks and reports that the institutions that failed in September had been on that list for six to 12 quarters with a median tenure of 10.5 quarters. The median for all banks that have failed thus far in 2011 is now 7 quarters compared to 5 in 2010.

There are still 238 banks on the Trepp watch list. These banks are generally small with an average asset size of $310 million. Only 12 of the highest risk banks have total assets in excess of $1 billion. Georgia and Florida seem likely to remain at the top of the bank failure list with an additional 46 banks in Georgia and 36 in Florida currently in an endangered status. Illinois has 25 troubled banks, Minnesotta16, North Carolina 13, and Tennessee 10.