And it is a growing problem for at least 150 banks:
More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.
The last three banks closed by the FDIC had nonperforming loans at about 6.5%. The really cheery part of the news? The total assets of these 150 banks come to some $193 billion. That’s 15 times the money FDIC has on hand to address bank failures.
Unlike the big banks that have been deemed too big to fail, these banks are too small to help. TARP is not there for them. 72 banks have failed already this year.
I don’t think we’re seeing the bottom of this downturn yet, regardless of all the cheerful pronouncements from the Fed.
