Advanta Bank, Six Other U.S. Lenders Collapse Amid Bad Loans

By Dakin Campbell

March 20 (Bloomberg) -- Advanta Bank Corp., 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 yesterday from the Federal Deposit Insurance Corp., which was named receiver. The FDIC couldn’t find a buyer for Advanta’s business, and will mail checks to insured depositors. Georgia’s Appalachian Community Bank, with $1 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. U.S. “problem” banks climbed to the highest level since 1992 in the fourth quarter and FDIC Chairman Sheila Bair warned Feb. 23 that the pace of failures may exceed last year’s total of 140.

Advanta Corp., the Spring House, Pennsylvania-based parent of Advanta Bank, filed for bankruptcy Nov. 9 and said the lender may be turned over to regulators. The parent company halted its credit-card lending last year amid defaults. The FDIC had ordered the bank unit to stop taking deposits, Advanta Corp. said in a July filing.

‘Overexposure’

Standard & Poor’s said yesterday 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 U.S. banks will record $296 billion more of losses on mortgages and other loans that aren’t being repaid in the next two years.

The following table lists the banks seized yesterday. Asset figures are in millions of U.S. dollars. Click on the bank name to see the FDIC’s statement on the closing.

FAILED BANK BUYER ASSETS Advanta Bank Corp. No buyer 1,600 Draper, UT

Appalachian Community Bank Community & Southern 1,010 Ellijay, GA Carrollton, GA

Bank of Hiawassee Citizens South Bank 377.8 Hiawassee, GA Gastonia, NC

First Lowndes Bank First Citizens 137.2 Fort Deposit, AL Luverne, AL

Century Security Bank Bank of Upson 96.5 Duluth, GA Thomaston, GA

American National Bank National Bank and Trust 70.3 Parma, OH Wilmington, OH

State Bank of Aurora Northern State Bank 28.2 Aurora, MN Ashland, WI

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Last Updated: March 20, 2010 00:00 EDT