By Marcy Gordon, AP Business Writer
WASHINGTON (AP) — Despite signs of an improving economy, the nation's banks are still struggling — in fact, the pace of bank failures has accelerated.
What would it take to turn the banking sector around? And what can people do to protect their savings in the meantime?
Here are some questions and answers about the wave of U.S. bank failures, as the latest quarterly snapshot of the industry painted a grim picture.
Q: How bad is this wave of failures?
A: A cascade of collapses began last year as the financial crisis struck.
Eighty-four banks have fallen so far this year as tumbling home prices and spiking unemployment pushed loan defaults upward. That's the largest number in a year since the early 1990s, at the apex of the savings and loan crisis. It compares with 25 bank failures last year and three in 2007.
The failures have sapped billions from the federal deposit insurance fund, which guarantees account holders' money when banks go under. The fund stood at $10.4 billion in the second quarter, its lowest point since 1992.The biggest failure this year: Colonial Bank, a heavy regional lender in real estate development based in Montgomery, Ala., which became the sixth-largest bank failure in U.S. history on Aug. 14. The Federal Deposit Insurance Corp. seized Colonial and sold its $20 billion in deposits, 346 branches in five states and about $22 billion of its assets to BB&T Corp.
Some analysts believe another 100 to 300 banks could fail before the crisis runs its course, largely because of souring loans for commercial real estate. The number of institutions on the FDIC's internal "problem list" — those rated by examiners as having very low capital cushions against risk and other deficiencies — jumped to 416 at the end of June from 305 in the first quarter, the agency reported Thursday.