The overs take it for the third week out of four...and each of those wins was by a wide margin, perhaps indicating a new stage in our ongoing bank failure cycle.
The real turn began four Fridays ago when we had what seemed like the dawning of a new era as five banks failed. That was trumped a week later by an epic Fourth of July fireworks celebration of seven failed banks. The seven failures were followed by a relative snoozer last week with only one failure. This past Friday was back on track with four failures: Temecula Valley Bank in CA, Vineyard Bank in CA, BankFirst in SD and First Piedmont Bank in GA.
As a personal aside, it's nice to see Cali and Georgia get back in the game. Illinois had broken off from the peloton and it seemed California and Georgia might simply compete for second as they let Chief Illiniwek run away and capture the black jersey of shame. But the chase pack has mobilized! In 2009, Georgia has posted ten bank failures, California eight bank failures, and Illinois leads with twelve. Those three states represent 30 of the 57 failures.
Anyway, back to the story at hand. With 17 failures in the past four weeks, it seems to indicate that the FDIC has finally ramped its staff to begin handling a sustainably higher level of failures. It has long been our suspicion that the FDIC was woefully undermanned for the crisis at hand. More than four failures per week for four weeks has us believing that the staffing issues are much closer to being ironed out.
As long time readers of TILB know, one of the metrics we are fond of tracking is what the FDIC assumes losses will be as a percentage of stated bank assets. In mid-2008, losses were averaging 20-25% of assets. More recently it has been in the 30%+ range, which is an enormous number.
Let's see how this week and last week went:
Bank of Wyoming, WY (last week's single failure)
Assets: $70mm, FDIC Losses: $27mm, Losses as a Percentage of Assets: 38.6%
First Piedmont Bank, GA
Assets: $115mm, FDIC Losses: $29mm, Losses as a Percentage of Assets: 25.2%
Assets: $275mm, FDIC Losses: $91mm, Losses as a Percentage of Assets: 33.1%
Vineyard Bank, CA
Assets: $1900mm, FDIC Losses: $579mm, Losses as a Percentage of Assets: 30.5%
Temecula Valley Bank, CA
Assets: $1500mm, FDIC Losses: $391mm, Losses as a Percentage of Assets: 26.1%
Straight Average Losses as a Percentage of Assets: 30.7%
Weighted Average Losses as a Percentage of Assets: 28.9%
This is in line with the longer-term trend and indicates that the lower loss percentage that accompanied the six Illinois-based banks all controlled by one family (the Campbell's) that failed on July 2nd was the anomaly.
When those six and one other bank failed two weeks ago, the summary stats were as follows:
Straight Average Losses as a Percentage of Assets: 23.0%We strongly suspected that because the banks were controlled by a single family, the FDIC took a few down that - if they'd been truly independent - it may have otherwise kept on life support for more time. In fact, we wrote:
Weighted Average Losses as a Percentage of Assets: 23.5%
We suppose this is "good" news as 23% average losses seems like a bit of an improvement (though still epically horrible). However, this week is a bit of a strange bird given that six of the banks are related to each other and all six were in pretty bad shape even if all six were not in the 30%+ camp. One of the six Illinois cousins was 30%+, one was 20%+, the largest bank was just under 20% and the other three were mid-teens. I suspect the reality is the FDIC knew if it closed one it would have to close all six.We will have more commentary on this week's failures in ensuing posts as two of the failed banks provide particular insight into the state of our current crisis.
The Texas bank, on the other hand, is just a total shit show at almost 40% losses to assets.