More banks failed in the United States this year than in any year since 1992, during the savings-and-loan crisis — and Florida led the way.
As 2010 winds to a close, the Federal Deposit Insurance Corp. has so far reported 157 bank failures, up from 140 in 2009. As recently as 2006, before the bubble burst, there were none.
Two weeks ago, Bank of Miami failed, pushing Florida to 29 bank failures for the year. No. 2 is Georgia, with 21 failures.
Put together, the adjacent Southern states, both hard hit by the real estate downturn and lingering recession, accounted for nearly a third of the failures nationwide.
And more are on the horizon.
The FDIC's list of "problem" banks — those whose weaknesses "threaten their continued financial viability"— stood at 860 as of Sept. 30, the highest since 1993. Historically, about a fifth of banks on the watch list fail.
Bank failures have left the FDIC insurance fund in the red, but the agency predicts it will have more than enough money to meet the anticipated cost of failures through 2014.
As the financial crisis of recent years recedes, the FDIC has been predicting that 2010 will be the high-water mark for bank implosions. "Going forward, the FDIC looks to see fewer failures," agency spokesman Greg Hernandez said.
Some industry observers agreed. "I think we're over the hump of the problem but far from the end," banking consultant Bert Ely said.
Others, like Miami economist and bank consultant Ken Thomas, aren't so sure we're past the worst, especially in Florida.
Thomas pointed out that the FDIC's 2011 operating budget increases staffing from 9,029 to 9,252, with nearly all the new positions temporary jobs to help regulators with bank closings and sale of failed bank assets.
"I predict we will still have substantial bank failures next year, most likely in the 125 to 150 range," Thomas said.
He anticipates the number of problem banks will continue to grow.
Nearly 37 percent of Florida's banks are considered "troubled and problematic" in a third-quarter report released this month by Coral Gables ratings agency BauerFinancial. That's almost triple the national average of just under 13 percent.
Only two other states had a higher percentage of troubled institutions: Georgia (40 percent) and Arizona (38 percent).
In contrast with those once fast-growth states, much of the rest of the banking world appears to be slowly recovering. In its latest report, BauerFinancial said it was the first time since 2007 that 38 percent of the nation's banks earned the highest possible rating.
By another national measure, the challenge is abating. On average, the banks that failed this year were much smaller than the banks that failed last year. Altogether, banks that failed in 2010 had assets of $92.1 billion, down 45.7 percent from $169.7 billion for banks that failed in 2009.
"These are very small institutions," said Gary Townsend of Hill-Townsend Capital. "The total assets that they represent is insignificant compared to the financial system as a whole. It's quite manageable."
Ordinarily, failed banks continue to operate virtually seamlessly. Typically, they are taken over by other banks in transactions arranged by regulators. Federal deposit insurance, for which the Federal Deposit Insurance Corp. was named, protects depositors from losses up to the insurance limits.
Since the closure of IndyMac Bank jolted the system in 2008, even uninsured deposits have been protected in more than 90 percent of failures, Ely said. Although depositors may be unaffected, borrowers can suffer disruptions to their credit lines, he said.
Bank failures are generally lagging indicators of economic trouble. The economy can be on the mend by the time struggling banks succumb.
Some of the nation's largest banks survived thanks to government assistance and are not included in the tally of failures. In 2009, for example, aid went to eight banks including Countrywide and Bank of America with combined assets of $1.9 trillion.
The list of failed institutions at the FDIC is filled with community banks that would not be considered "too big to fail."
The loans that brought them down were predominantly commercial loans, Hernandez said, which sets them apart from the banking giants whose problems were rooted in home mortgages.
As of Sept. 30, the FDIC insurance fund for bank deposits had a balance of negative $8 billion. But that doesn't include reserves such as premiums collected in advance from banks.
The agency is predicting that bank failures will cost $52 billion through 2014, and has enough money to cover that, Hernandez said.
Times staff writer Jeff Harrington contributed to this report, which includes information from the Washington Post. Jeff Harrington can be reached at firstname.lastname@example.org or (727) 893-8242.