99th U.S. Bank Failure of 2009 Strikes with San Joaquin Bank of Bakersfield California

October 18, 2009 by · Leave a Comment
Filed under: Bank Failure 

More losses from sub-prime home loans and defaulting commercial real estate loans are becoming a common theme.  Sub-prime loan defaults are to be expected with many of those properties having mortgages written at a value that reflects the real estate bubble of 2003-07.  Many of those borrowers did not have the income to support the increased value of those homes and were using the sale or “flipping” of the home as their exit strategy. What is more troublesome is the increasing theme of banks that hold commercial paper on their books causing them to fail.

During the same period, many bank wrote construction loans and a large amount were for condominiums and retail shopping centers.  If you have seen how consumer spending has decreased and many condo projects are being foreclosed on, it makes sense that this type of loan along with others are dragging down on the banks.  The stock may be up but the more I look at the numbers, a “double-dip” recession can not be ruled out.  The consumer needs to come back at large to maintain the earning expectations that we have priced in at this point.  I’ll keep you posted.

Reuters, Washington D.C. – One more U.S. bank was shuttered on Friday, as the tally of failures so far this year inched closer to 100.

The pace of bank failures has picked up sharply this year as the industry continues to work through bad loans that were made during the credit boom.  On Friday regulators closed San Joaquin Bank of Bakersfield, California. It was the 99th U.S. bank failure of 2009.

The Federal Deposit Insurance Corp, which was named receiver, said San Joaquin had $775 million in assets and $631 million in deposits.  Citizens Business Bank of Ontario, Calif., agreed to assume all deposits of San Joaquin, whose five branches will reopen on Monday as branches of Citizens Business Bank.

The failure is expected to cost the FDIC’s insurance fund a total of $103 million.

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