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Texas Ties Its Record For Bank Failures; More Foreseen

May 22, 1987

DALLAS (AP) _ Banks are failing faster in Texas than in any other state, with a record- tying 26 going under this year so far, and the number is expected to climb even as the Lone Star State recovers from turmoil in the oil industry.

″It’s getting to be a matter of how long they can hold on,″ said State Banking Commission spokesman Richard Nun.

The state’s 25th and 26th bank failures were recorded Thursday with the collapse of a bank in Austin and another in Houston. Texas last year had 26 bank failures, more than any state in any year.

Officials refused to predict how many more of the 2,000-plus banks in Texas will fail by the end of the year.

So, far 81 banking institutions have failed across the country this year, and the number could soar as high as 200 by Dec. 31, said Federal Deposit Insurance Corp. spokesman Bill Olcheski.

Last year, nearly 140 failed across the nation, the most since the FDIC’s founding in 1933.

In Texas, Nun said, ″up through 1986, 90 percent of failures were primarily the result of poor management, but at least half of the failures now are no longer caused just by poor management.″

″It’s the hanging-on of poor economic conditions,″ he said. ″Even the strong bank - if he’s got two or three tackles hanging on him - sooner or later he’s going to come down.″

During the state’s boom years in the late 1970s and early 1980s, many lenders got accustomed to widespread land speculation. But when oil prices took a nosedive in late 1985, energy and real estate industries fell apart.

Layoffs mounted in depressed cities throughout Texas. The state is facing a multibillion-dollar budget deficit, and there are mounting calls to enact an income tax for the first time.

″The banking system is more or less reflective of the economy as a whole,″ said Frank Anderson, a Dallas banking analyst with Ferguson & Co.

Anderson said he expects the bank failure trend to continue through 1987, despite an improving state economy, because of a lag effect.

″We’re seeing some improvement - in agriculture, in oil, even in real estate - as we work our way through the cycle,″ he said.

However, Anderson said he wasn’t overly distressed at the record number of banking failures.

″Texas has 14 percent of the total number of banks in the country, more than 2,000,″ he said. ″We’ve had less than 1.5 percent of that number fail. It’s not something you want to see, but it’s still a small part of the whole picture.″

Poor lending practices and the worsening local economy led regulators to shut down Lake Austin National Bank in Austin on Thursday, said Judith Walter, the U.S. Comptroller’s senior deputy controller for administration.

The bank, which was chartered in 1983, had assets of about $48 million, the comptroller’s office said.

Greater Texas Bank Southwest in Austin planned, pending court approval, to assume the failed bank’s deposits and reopen the facility as a branch, said FDIC spokeswoman Julie Amberson.

Poor supervision of lending and imprudent lending practices resulting in a substantial increase in problem loans were cited in the case of the other bank closed by regulators on Thursday, Texas Investment Bank N.A. in Houston.

The bank, which was chartered in 1972, had assets of about $17 million, said comptroller spokesman Frank Bance.

″Some of the good bankers now - fellows who have sound, well-managed banks now - are that way because they were considered ultra-conservative a few years ago,″ Nun said.

″Those are the kinds of guys who survived the Depression and know the value of saving for a rainy day.″

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