Saturday, May 11, 2013

Unofficial Problem Bank list declines to 771 Institutions

by Bill McBride on 5/11/2013 08:09:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 10, 2013.

Changes and comments from surferdude808:

Surprisingly, the FDIC cranked up the closing machine today. The only changes to the Unofficial Problem Bank List this week were the two failures. After removal, the list holds 771 institutions with assets of $284.8 billion. A year ago, the list held 924 institutions with assets of $361.1 billion.

Caught in the FDIC closing machine were two banks -- Sunrise Bank, Valdosta, GA ($66 million) and Pisgah Community Bank, Asheville, NC ($25 million) - controlled by Capitol Bancorp LTD (Ticker: CBCRQ). We have probably spilled more ink on the travails of Capital Bancorp than any other banking organization since the publication of this list in August 2009. Here is a sampling over the past two years: June 3, 2011, February 24, 2012, August 10, 2012, February 15, 2013, and February 22, 2013.

After controlling more than 50 banks at its peak, Capitol Bancorp has reduced its subsidiary count to 12 banks through intra-company mergers and divestitures to outside parties. Primarily, the mergers and sales are designed to raise capital or avert a failure. A failure of any one bank subsidiary could trigger the failure of all banking subsidiaries. Through statute referred to as Cross-Guaranty, the FDIC can demand reimbursement for the cost of a failure against any of Capitol Bancorp's still open banking subsidiaries. To facilitate the divestitures, the FDIC has issued at least 16 Cross-Guaranty waivers. Some observers may question the cost effectiveness of issuing the waivers.

The FDIC has declined to comment if it will assess other banking units of Capitol Bancorp for the estimated $26.2 million cost of the failures. In a report by SNL Securities, " FDIC spokeswoman LaJuan Williams-Young said "I don't have anything to say about that right now" in response to an enforcement of a cross-guaranty liability. In a separate report in the American Banker, Ralph "Chip" MacDonald, a partner at Jones Day, stated "They [FDIC] also have a long time to assert it. My guess is that it will hold off until they evaluated the situation more closely." Given that Capitol Bancorp has been in troubled condition for many years with several near brushes with a subsidiary failing, some observers may question why the FDIC would need more time to evaluate the situation. Of Capitol Bancorp's remaining bank subsidiaries, seven with aggregate assets of $1.4 billion are on the Unofficial Problem Bank List. It will be worth watching to see if the FDIC pulls the cross-guaranty trigger against any of these.

Next week, we anticipate the OC C will release its enforcement actions through mid-April 2013.

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