Commercial real estate loans were the principal cause of the five bank failures reported in November according to Trepp's November 2011 U.S. Bank Failure Report.  These loans comprised 80.8 percent of the $160 million in non-performing loans that caused the bank failures in Georgia, Louisiana, Iowa, Nebraska, and Utah.  The majority of the commercial real estate loans (64.4 percent of the total) were land and construction loans, the remaining 16.5 percent were commercial mortgages.

Delinquent residential real estate loans were the secondary cause of distress, representing 10.1 percent of the portfolios at the failed banks; of the remainder 5.4 percent were commercial and industrial loans and other loans comprised 3.7 percent.

In what Trepp called a pattern, the five failures in November followed eleven in October.  This year there has been a spike in failures in the month immediately following the end of a quarter and then a drop in the two subsequent months.  Thus far in 2011 90 banks have been closed by regulators, an average of 7.5 per month, a pace indicating a total of 100 for the year.  Trepp said it expects the bank closures to extend into 2012 and possibly beyond although this will largely depend on the economy in general and real estate in particular. 

The estimated costs to resolve the failed banks (loss severity) fell to 17.5 percent of failed bank assets, down from 22 percent in October.  Loss-sharing was featured in only one of the five failures during the month.

Trepp noted that the banks that failed in November had been on its watchlist for a considerable amount of time - a median of 12 months - and all had featured the highest Fail Risk Scores issued by Trepp, a ten.  After the November failures there are 227 banks with high Failure Risk Scores remaining on the Trepp Watchlist although smaller banks now predominate. 

Trepp predicts that there will be a high number of failures in Georgia, Florida, Illinois, Minnesota, North Carolina, and Tennessee in upcoming months.