It was bad mortgage loans to risky borrowers that brought down the likes of Washington Mutual Bank (WAMU). While many have been bailed out, the list of banks with bad loans continues to grow.
It is, however, growing slowly, though that in and of itself is not good news. The reason numbers have not been growing quickly is partly due to the fact that the FDIC closed so many failing banks. That report comes via the Investigative Reporting Workshop at American University in Washington.
The bad loans continue to weigh on banks. The FDIC closed 140 failed banks in 2009, including 45 in the fourth quarter. Nearly all had very high levels of bad loans.
Meanwhile, the IRW's report stated that at the end of December, a total of 389 banks had “troubled asset ratios” above 100. That is a slight rise from 369 in September.
Troubled assets are defined to include loans that are 90 days or more in arrears, loans on which the bank is no longer collecting interest and real estate the bank already owns, generally through foreclosure. A ratio above 100 means a bank had more troubled loans than money available to cover potential losses due to defaults.
The number of banks with ratios above 100 has risen from 24 at the end of 2007 to 163 in the last quarter of 2008 and the 389 noted above. Meanwhile, due to bank closures and mergers, the number of banks has fallen from 8,542 banks at the end of 2007 to 8,008 banks at the end of 2009. Given that, the percentage of banks with high troubled asset ratios has climbed 4.9 percent, or one out of every 20.
Those wanting to find out how their bank's troubled asset ratio compares can use the IRW's banktracker, hoeted by MSNBC. The median value nationwide is 14.5. Fremont Bank, one of the local banks touted by the Huffington Post in their "Move Your Money" program, shows a TAR of 30.3, well above that number.
Written by Michael Santo
HULIQ.com
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