Advanta joins list of failed American banks

San Francisco : Advanta Bank Corporation, owned by the bankrupt credit-card issuer, was shut by regulators along with three lenders in Georgia as the number of failed banks this year climbed to 37.

Advanta was closed by Utah's regulator, according to a statement on Friday from the Federal Deposit Insurance Corporation (FDIC), which was named receiver. The FDIC couldn't find a buyer for Advanta's business, and will mail cheques to insured depositors. Georgia's Appalachian Community Bank, with $1 billion (Dh3.67 billion) in assets, was closed along with lenders in Minnesota, Alabama and Ohio.

"Banks made loans they shouldn't have," said Alan Hess, a professor at the University of Washington's Foster School of Business. "A lot of the banks in Washington and elsewhere are going out of business because of commercial real estate." Four banks in Washington state have been seized this year.

Lenders are collapsing at the fastest pace in 17 years amid losses on residential and commercial real estate loans made at the height of the market.

US "problem" banks climbed to the highest level since 1992 in the fourth quarter and FDIC Chairman Sheila Bair warned on February 23 that the pace of failures may exceed last year's total of 140.

Overexposure

Advanta Corporation, parent of Advanta Bank, filed for bankruptcy on November 9. The parent company halted its credit-card lending last year amid defaults. The FDIC had ordered the bank unit to stop taking deposits.

Standard & Poor's said on Friday it had maintained a negative outlook on the financial industry because of the "damaging overexposure" that firms have to commercial real estate and subprime.

The rating reflects "uncertainty about the strength and timing of the economic recovery" and "a significant level of non-performing assets". S&P analysts Jeffrey Zaun and Rian M. Pressman wrote in the report.

Moody's Investors Service, another ratings company, said in a report on March 10 that US banks will record $296 billion more of losses on mortgages and other loans that aren't being repaid in the next two years.

Going bust

Advanta Bank Corporation: No buyer; $1.6 billion in assets.

Appalachian Community Bank: Bought by Community & Southern; assets of $1.01 billion.

Bank of Hiawassee: Bought by Citizens South Bank; assets of $377.8 million.

First Lowndes Bank: Bought by First Citizens; assets of $137.2 million.

Century Security Bank: Bought by Bank of Upson; assets of $96.5 million.

American National Bank: Bought by National Bank and Trust; assets of $70.3 million.

State Bank of Aurora: Bought by Northern State Bank; assets of $28.2 million.