Two banks failed in October, the first to collapse since the start of the coronavirus pandemic. Banking experts say they won't be the last, USA Today reported. At least 50 of the country's more than 5,000 banks are considered troubled, according to Bauer Financial, a company in Coral Gables, Fla., that tracks the health of financial institutions. That means they have high levels of nonperforming loans and not enough capital set aside to protect them if more of their loans go bad or if the economy gets any worse. The most troubled banks have high levels of bad loans and other assets compared with their total capital on hand, a measure known as a "Texas Ratio" and one of the most important indicators used by analysts to determine a bank's long-term viability. From vacant storefronts and office buildings to renters' inability to pay rent due to financial hardship, he sees the pandemic taking a much greater toll on the economy — one that will result in far more foreclosures, bankruptcies and bank failures than many think. "We're gearing up for what could be close to a 2008 housing crisis," said Jason Vanslette, a mortgage foreclosure specialist and partner at Kelley Kronenberg law firm. "And commercial loans, my God. There's going to be a massive amount of defaults on commercial properties." Besides being tiny, the two banks that failed in October have little in common. First City Bank of Florida in Fort Walton Beach, with its $135 million in assets, had been struggling with problem loans since the last recession. Having to set aside additional capital for loan loss provisions to deal with COVID-19 related problems simply pushed it over the edge. Almena State Bank, with $70 million in assets, was different. The Kansas bank got hit hard by bad agricultural loans made during the past few years of falling commodity prices brought on by robust harvests and the US-China trade war. Of the 10 banks considered most troubled by Bauer Financial, six have similar stories to that of First City. They have been weighted down by loan problems for more than 10 years. The other four are more like Almena — impacted by the flagging economy in farm states, where agricultural loan delinquencies hit an eight-year high in March and repayment rates have continued declining until this summer, according to the Federal Reserve of Kansas City. Two of the most troubled banks were also upended by fraud on the part of their chief executive officers.
