FDIC Officials Concerned About Weak Loan Portfolios : Record Bank Failures Seen for ’85
Despite earlier predictions that bank failures would decline this year, Federal Deposit Insurance Corp. officials now believe that 1985 will set a new record for bank collapses, a survey by the FDIC has found.
The FDIC, which oversees the federal bank deposit insurance system, logged 79 failures in 1984--the most in any year since the federal insurance program was begun in 1933.
But the survey of the FDIC’s regional directors during the agency’s annual winter management meeting in San Diego last week revealed that most of the directors believe that banks’ problems with agricultural, energy and real estate loans will continue throughout 1985.
The directors said they anticipate substantially more bank failures this year than the 79 recorded in 1984.
Results of the survey were disclosed to The Times on Saturday by Alan Whitney, director of corporate communications for the FDIC.
The failure rate already is running ahead of last year’s, with seven failures logged as of Monday, compared to four failures for the same period in 1984.
Partly to meet the extra workload from the anticipated failures, the FDIC’s 18-month-old bank liquidation office in Costa Mesa is adding 100 new employees in the next few months, a 33% staff increase. The office, according to Charles Holm, liquidator-in-charge, is responsible for all of Southern California.
A growing number of farm-loan losses in the Midwest is largely responsible for the revised estimate for 1985, but Southern California’s independent banking industry is likely to contribute a sizable share of failures, industry and regulatory sources say.
Banking industry observers say that Southern California, where stagnant or even declining real estate values are forcing many independent banks to take losses on real estate-secured loans, could again help to give California one of the leading failure rates in the nation.
In 1984, California and Texas, with six failures each, tied for second place among the 22 states with bank failures. Tennessee led the nation with 11 failures, mostly related to the collapse of the Jake Butcher banking empire.
