More Than 150 Banks Are On the Brink

Bloomberg had an interesting article today discussing how banks that have nonperforming loans that equal 5% or more of their holdings are at serious risk of failure. The report said there are more than 150 such publicly-traded U.S. lenders.

Marshall & Ilsley (NYSE: MI) and Synovus Financial (NYSE: SNV) are the biggest banks with nonperforming loans and the biggest exceeding 10% is Flagstar Bancorp Inc. (NYSE: FBC).

Walter Mix, former commissioner of the California Department of Financial Institutions and now a consultant, said, "At a 3 percent level, I'd be concerned that there’s some underlying issue, and if they're at 5% , chances are regulators have them classified as being in unsafe and unsound condition."

Three lenders with nonaccruing ratios of at least 6.2% as of March were closed last week. Corus Bankshares Inc. (Nasdaq: CORS), Guaranty Financial Group Inc. (NYSE: GFG) and Colonial BancGroup Inc. (NYSE: CNB).

Ratios above 5% don't always lead to failures because banks keep capital cushions and set aside reserves to absorb bad loans.

Link to Bloomberg Article

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