19 Banks Crushed by Bank Home Foreclosures for Sale

by Simon Lindsay on Foreclosures

A total of 19 banks were closed in March due to their huge losses from bad commercial property loans and record numbers of bank home foreclosures for sale.

According to Alan Hess, business professor at the University of Washington, these failed banks made loans that they should have not made if only they followed their lending policies. Banks have been failing since 2008 at the fastest pace in history because of their huge exposure to commercial and residential construction loans.

Based on records from the Federal Deposit Insurance Corporation, five banks were shuttered on March 5, one on March 11, three on March 12, seven on March 19 and four on March 26. These followed 7 banks that were closed in February and 15 banks in January, putting the number of failed banks so far this year to a staggering total of 41.

Two banks in Georgia, which have been topping other U.S. states in number of bank failures, failed on March 26. They were McIntosh Commercial Bank in Carrolton and Unity National Bank in Cartersville. The other banks were Key West Bank in Florida and Desert Hills Bank in Arizona.

While some banks were battered largely by the huge number of bank home foreclosures for sale in their books, others were downed by huge commercial development loans. According to Standard & Poor’, it has not changed its negative outlook on banks because of their overexposure to failed commercial property projects and to subprime mortgage loans.

As of the end of 2009, McIntosh had about $343.3 million in deposits and $362.9 million in assets. It was CharterBank that acquired all its deposits including its failed assets.

Unity National, meanwhile, had about $264.3 million in deposits and $292.2 million in assets as of the end of 2009. Its deposits, including its failed assets, were assumed by Bank of the Ozarks.

The biggest bank that failed on March 19 was Advanta Bank Corporation in Draper, Utah. It had about $1.5 billion in deposits and $1.6 billion assets as of the end of 2009. Advanta was the third Utah bank that closed since March 5 when Ogden Bank failed.

Advanta Corporation, the parent company of Advanta Bank, became bankrupt in November last year largely because of huge losses from credit card defaults. The FDIC has not yet found a buyer for Advanta Bank.

According to Moody’s Investors Service, banks in the U.S. will lose $296 billion more from bad commercial loans and from bank home foreclosures for sale this year.

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