Sunday, May 27, 2018

May 2018: Unofficial Problem Bank list; Which Bank is the "Mystery" Problem Bank?

by Bill McBride on 5/27/2018 08:12:00 AM

Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 2018.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for May 2018. The list had a net decline of two insured institutions to 92 banks after three additions and five removals. After the net changes to the list and updating asset with 2018Q1 figures, aggregate assets declined during the month by $911 million to $18.0 billion. A year ago, the list held 140 institutions with assets of $34.2 billion.

Actions were terminated against HomeStar Bank and Financial Services, Manteno, IL ($359 million); Freedom Bank of Oklahoma, Tulsa, OK ($156 million); and Superior Bank, Hazelwood, MO ($29 million). Finding their way off the list through merger were Indus American Bank, Edison, NJ ($231 million) and Wawel Bank, Wallington, NJ ($73 million).

Additions this month were Maryland Financial Bank, Towson, MD ($66 million); Sunrise Bank Dakota, Onida, SD ($65 million); and The First National Bank of Sedan, Sedan, KS ($64 million).

Name and location changes made this month include Saigon National Bank (Cert #57974), Westminster, CA with a name change to California International Bank, N.A. and a headquarters move to Rosemead, CA; First State Bank (Cert #9502), Danville, VA with a name change to Movement Bank; Covenant Bank (Cert #34460), Leeds, AL with a name change to Millennial Bank; California Business Bank (Cert #58037), Los Angeles, CA with a headquarters move to Irvine, CA; and BNB Hana Bank, National Association (Cert #26790), Fort Lee, NJ with a name change to KEB Hana Bank USA, National Association.

This week the FDIC released their official Problem Bank figures for the end of the first quarter of 2018, with their list holding 92 institutions with assets of $56.4 billion. At the end of the fourth quarter of 2017, the FDIC reported the 95 institutions with assets of $13.9 billion were on the official Problem Bank List. So if we understand the FDIC correctly, over the past 90 days, the official Problem Bank List has declined by three institutions but aggregate assets increased by a whopping $42.5 billion.

During the press conference this week and its press release, the FDIC highlighted the decline in the number of problem banks being the lowest since the first quarter of 2008, but there was no mention of the significant jump in problem bank assets. In the question and answer section of the press conference, an intrepid reporter asked FDIC Chairman Gruenberg about the increase. In response, Chairman Gruenberg, consistent with normal protocol, said he would not comment about the condition of an open institution.

Given that the FDIC does not disclose the contents of its official Problem Bank List, we are left to ponder what large-sized institution they added. Because of the small change in the number of banks on the list, our first guess is that a single institution with assets in the $40 billion to $46 billion range was added to the list. We have scoured all available information sources such as the enforcement action search engines of the Federal Reserve, FDIC, and OCC and SEC disclosures of publicly traded bank/bank holding companies without finding any recent safety & soundness actions issued against banks with asset sizes in the $40 billion to $46 billion range. There are six institutions with assets in this range, with five being controlled by a parent company whose stock is publicly traded. Obviously, receiving an enforcement action that should be issued to a bank that is on the Problem Bank List, is worthy of an 8-K disclosure. There is only one institution in that asset range, without an ultimate domestic parent, which would not have to disclose issuance of an enforcement action. We will continue to monitor the banking regulator websites and other information sources. Ideally, this mystery is solved by our next update.
CR Note: When the unofficial weekly was list was first published on August 7, 2009 it had 389 institutions. The list peaked at just over 1,000 institutions in 2011. Now there are only 92 banks on the unofficial list (the FDIC reported 92 banks on the official problem bank list at the end of 2017).

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.