Although eight banks failed in July, a slight increase from the seven failures in June, the pace of failures is declining compared to this time last year, according to analytics firm Trepp.

In the first seven months of 2012, 39 banks closed, down from 61 in same period of 2011 and 108 in 2010. Despite the slowing pace, there are still 190 banks at high risk of failure, Trepp analysts say, leading them to expect more failures throughout the year and beyond.

“The slower pace of bank closures is attributable to more time being ‘added to the clock’ for ailing banks, as well as some actual progress among these banks in capital raising and performance improvement,” Trepp said. 

In the first quarter, 211 banks were at risk of failure, according to Trepp; 21 of those have failed or been acquired.

Commercial real estate exposure is the main source of problem loans for the July failures, comprising $142.8 million, or 70.4%, of the total $202.8 million in nonperforming loans at the failed banks. 

Commercial mortgages made up $58.1 million, or 28.6%, of the nonperforming total, while construction and land loans accounted for $84.7 million, or 41.8%.

Residential mortgages were a secondary source of distress, with $38.9 million, or 19.2%, of the total nonperforming loans. C&I loans contributed $4.5 million of the nonperforming total. Other nonperforming loans, including unsecured consumer loans, totaled $16.6 million.

Among these high-risk banks, the greatest institution counts are in Georgia (36 banks), Florida (26), Illinois (24), Minnesota (11), North Carolina (10), Tennessee (eight) and Missouri (seven). 

These states are most likely to continue to experience bank failures in the months ahead, Trepp analysts said.

jhilley@housingwire.com

@JustinHilley