Saturday, June 25, 2016

June 2016: Unofficial Problem Bank list declines to 203 Institutions, Q2 2016 Transition Matrix

by Bill McBride on 6/25/2016 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 June 2016.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for June 2016. During the month, the list fell from 206 institutions to 203 after four removals and one addition. Assets dropped by only $177 million to an aggregate $60.6 billion. Since the list has been in a net monthly decline starting in July 2012, this is the smallest monthly decline in the list count. A year ago, the list held 309 institutions with assets of $89.8 billion.

This month, actions have been terminated against Georgia Primary Bank, Atlanta, GA ($155 million); South County Bank, National Association, Rancho Santa Margarita, CA ($137 million); First State Bank of Warner, Warner, SD ($64 million); and Independence Bank, East Greenwich, RI ($39 million).

The addition this month was Grand Rivers Community Bank, Grand Chain, IL ($76 million). Also, we returned Gateway Bank, FSB, Oakland, CA, back to the list after it inadvertently was removed as the bank only divested a branch instead of being an entire sale.
Unofficial Problem Banks
With it being the end of the second quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,710 institutions have appeared on a weekly or monthly list at some point. There have been 1,507 institutions that have transitioned through the list. Departure methods include 854 action terminations, 398 failures, 240 mergers, and 15 voluntary liquidations. The second quarter of 2015 started with 222 institutions on the list, so the 17 action terminations during the quarter reduced the list by 7.7 percent, which is the lowest quarterly termination rate since the 6.9 percent in the fourth quarter of 2014. Of the 389 institutions on the first published list, 23 or 5.9 percent still remain more than six years later. The 398 failures represent 23.3 percent of the 1,710 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

At the start of the month, the FDIC provided updated figures on the Official Problem Bank List with the change during the quarter being a bit perplexing. The FDIC said the official list stood at 165 institutions with assets of $30.9 billion, down from 183 institutions with assets $46.8 billion at year-end. Thus, during the first quarter, the official list declined by 18 institutions and $15.9 billion in assets, which results in the 18 removals having an average asset size of $883 million. The average asset size of institutions on the official list at the start of the first quarter was only $256 million ($46.8 billion/183 institutions). In comparison, the average asset size of institutions currently on the unofficial list is higher at $299 million ($60.6 billion/203 institutions), which includes the $13.7 billion Flagstar Bank and six other institutions that range between $1-2.3 billion. Removing Flagstar Bank from the unofficial list reduces the list's average institution asset size to $232 million and aggregate assets drop to $46.9, much closer to the official figures at the end of the first quarter. In the preceding three quarters, the FDIC reported quarterly asset declines for the official list of $3.8 billion in the second quarter of 2015, $5.4 billion in the third quarter of 2015, and $4.3 billion in the fourth quarter of 2015. So it is unclear how the FDIC was able to ramp-up the asset removal rate to $15.9 billion during the first quarter absent the removal of Flagstar Bank, which is an SEC registrant that would be required to file an 8-K notice if its enforcement action had been terminated. While the FDIC closely guards the institutions on the official list, some banking industry participants believe the FDIC will manipulate the official list to mask the identity of large banks entering/exiting the list.
Unofficial Problem Bank List
Change Summary
  Number of InstitutionsAssets ($Thousands)
Start (8/7/2009)  389276,313,429
 
Subtractions     
  Action Terminated166(63,507,432)
  Unassisted Merger39(9,713,878)
  Voluntary Liquidation4(10,584,114)
  Failures157(184,803,449)
  Asset Change(1,602,381)
 
Still on List at 6/30/2016  236,102,381
 
Additions after
8/7/2009
  18054,508,542
 
End (6/30//2016)  20360,610,923
 
Intraperiod Deletions1     
  Action Terminated688279,432,438
  Unassisted Merger20179,734,581
  Voluntary Liquidation112,389,500
  Failures241119,769,682
  Total1,141481,326,201
1Institution not on 8/7/2009 or 6/30/2016 list but appeared on a weekly list.