In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Saturday, June 08, 2013

Unofficial Problem Bank list declines to 760 Institutions

by Calculated Risk on 6/08/2013 08:46:00 AM

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

Here is the unofficial problem bank list for June 7, 2013.

Changes and comments from surferdude808:

As CR posted yesterday, another bank controlled by Capitol Bancorp, LTD (Ticker: CBCRQ), 1st Commerce Bank, North Las Vegas, NV ($20 million) was closed intra-week. According to a report by SNL Securities, the FDIC used its authority that was received within the Federal Deposit Insurance Corporation Improvement Act of 1991 to close 1st Commerce Bank. Normally, the FDIC must wait for the chartering authority to close a bank. However, this authority allows the FDIC to close a bank to limit losses to the insurance fund when the chartering authority is delayed in terminating the charter. As reported, it has been more than a decade since a bank has been closed in this manner and this is only the fourth time the FDIC has exercised this authority since enactment of the legislation. Capitol Bancorp had been litigating the closure of 1st Commerce Bank and had obtained an injunction that was extended until June 10th, but the FDIC stepped around that action. While the FDIC accelerated the closing to limit losses to the insurance fund, 1st Commerce Bank has a failure cost estimate of $9.4 million, which is inordinately high at nearly 47 percent of the bank's assets.

The fate of the remaining seven banks controlled by Capital Bancorp is uncertain. So far, the four failed banks of Capitol Bancorp have cost the FDIC insurance e fund an estimated $44.2 million. The FDIC could assess the $44.2 million failure cost against the seven banks under cross guarantee authority. At March 31, 2013, the seven banks had cumulative equity of $51.8 million. Thus, an assertion of cross guarantee by the FDIC would likely lead to a closing of the seven banks. Some observers believe the FDIC has been generous in not asserting its cross guarantee authority. The geographic dispersion of the franchise, the unusual capital structure of the banks, or the lack of a single buyer could contribute to the piecemeal closings. The most vulnerable units appear to be Bank of Las Vegas, Henderson, NV ($247 million) and Sunrise Bank of Arizona ($206 million). We will continue to monitor the status of the remaining operating banks of Capitol Bancorp.

Meanwhile, the Unofficial Problem Bank List had a net reduction of one institution to 760 after two removals and one addition. Assets total $277.5 billion, which is the first weekly increase since the last week of January 2013. A year ago, the list held 923 institutions with assets of $355.7 billion.

The other removal from failure this week was Mountain National Bank, Sevierville, TN ($437 million Ticker: MNBT), which had a much more pedestrian estimated failure cost at 7.7 percent of assets. The addition was Colonial Bank, FSB, Vineland, NJ ($633 million Ticker: COBK).

Except for any potential follow through closings, we anticipate a quiet week for changes as the OCC will likely wait until June 21st to publish its actions through mid-May 2013.