by Calculated Risk on 8/01/2009 01:18:00 PM

From Costar: Post Office Looking at Consolidation of 3,243 of its 4,851 Largest Branches and Stations (ht John)

The Postal Service sent a notice to American Postal Workers Union executives this summer that it was considering consolidation options in every major metro market in the country and would consider closing 3,243 of its 4,851 largest branches and centers in the review process. ... The review process was to last most of the summer ... but they want the consolidation to occur by October 2010.
...
According to USPS records, it owns 8,546 facilities totaling 219.6 million square feet and leases another 25,272 locations totaling 912.2 million square feet. ...

[T]he USPS could be studying the consolidation of more than 14 million square feet of retail/office/industrial space across the country. To put that in perspective, 14 million square feet would be the equivalent of about all of the vacant retail space in a market such as Boston or Cleveland or Denver or the Inland Empire or Tampa.
...
In May, the U.S. Government Accountability Office (GAO) issued a report en titled "U.S. Postal Service - Network Rightsizing Needed to Help Keep USPS Financially Viable." The GAO study criticized the USPS for failing to take the necessary steps to remain viable, such as "rightsizing its retail and mail processing networks by consolidating operations and closing unnecessary facilities," and "reducing the size of its workforce."

Here is the GAO report:

Network rightsizing by consolidating operations and closing unnecessary facilities is likely to be only one of many steps that USPS will need to take to remain financially viable in the long run. ... We recognize that USPS faces formidable resistance to closing and consolidating facilities because of concerns about the effects of such actions on service, employees, and local communities.

Click on chart for larger image in new window.

The postal service has already reduced their footprint a little since 2003 as shown in the chart from the GAO.

But the GAO report suggests the next reductions may be much more significant. How about another 14 million square feet of vacant retail space on the market?

by Calculated Risk on 8/01/2009 08:00:00 AM

The FDIC closed five more banks on Friday, and that brings the total FDIC bank failures to 69 in 2009. The following graph shows bank failures by week in 2009.

Click on graph for larger image in new window.

Note: Week 1 on graph ends Jan 9th.

The pace has really picked up recently, with the FDIC seizing almost 5 banks per week in July, and with 5 months to go, it seems 125 to 150 bank failures this year is likely.

The current pace suggests there will be more failures in 2009 than in the early years of the S&L crisis. From 1982 thorough 1984 there were about 100 failures per year, and then the number of failures really increased as the 2nd graph shows.

There were 28 weeks during the S&L crisis when regulators closed 10 or more banks, and the peak was April 20, 1989 with 60 bank closures (there were 7 separate weeks with more than 30 closures in the late '80s and early '90s).

The 2nd graph covers the entire FDIC period (annually since 1934).

For a graph that includes the 1920s and early '30s (before the FDIC was enacted) see the 3rd graph here.

Of course the number of banks isn't the only measure. Many banks today have more branches, and far more assets and deposits.

With Colonial (about $25.5 billion in assets), Guaranty (Texas, with close to $15.4 billion in assets) and Corus ($7.7 billion) all on the ropes, the dollars could really add up later this year. Corus and Guaranty will probably be seized in the next few weeks.

The FDIC era source data is here - including by assets (in most cases) - under Failures and Assistance Transactions

The pre-FDIC data is here.

by Calculated Risk on 7/31/2009 11:59:00 PM

by Calculated Risk on 7/31/2009 09:24:00 PM

From the WSJ: Colonial Financing Pact Collapses

Colonial BancGroup Inc.'s second-quarter loss widened on big charges and a key financing deal fell through, pushing the company out of compliance with Alabama capital requirements and causing doubts about the company's ability to remain a going concern.
...
In June, the Colonial Bank unit agreed to oversight by the Federal Deposit Insurance Corp. and Alabama Banking Department and to other steps ... a $26 billion institution.

From the SEC 8-K filed today:

Going Concern Assessment
As a result of the above described regulatory actions and the current uncertainties associated with Colonial’s ability to increase its capital levels to meet regulatory requirements, management has concluded that there is substantial doubt about Colonial’s ability to continue as a going concern. The Company expects to update its 2008 financial statements contained in the Company’s Annual Report on Form 10-K, prior to filing its June 30, 2009 Form 10-Q. The Company is working to implement the Capital Action Plan described above which includes strategies to increase capital or to sell the Company in order to address the uncertainties giving rise to the going concern assessment.

Something for another BFF.

by Calculated Risk on 7/31/2009 08:16:00 PM

Mutual Failure
Our oversight, their ethics
We should demand more
by Soylent Green is People
From the FDIC:

Mutual Bank, Harvey, Illinois, was closed today by the Illinois Department of Financial Professional Regulation - Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $696 million. ... Mutual Bank is the 69th FDIC-insured institution to fail in the nation this year, and the thirteenth in Illinois. The last FDIC-insured institution to be closed in the state was First National Bank of Danville, Danville, on July 2, 2009.

That makes five today ...

by Calculated Risk on 7/31/2009 06:16:00 PM

Bair's Cash for Clunkers
Hasn't run out of money
Four traded so far.
by Soylent Green is People
From the FDIC: Herring Bank, Amarillo, Texas, Assumes All of the Deposits of First State Bank of Altus, Altus, Oklahoma

First State Bank of Altus, Altus, Oklahoma, was closed today by the Oklahoma State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 19, 2009, First State Bank of Altus had total assets of $103.4 million and deposits of approximately $98.2 million. In addition assuming all of the deposits of the failed bank, Herring Bank will purchase approximately $64.4 million in assets. The FDIC will retain the remaining assets for later disposition.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.2 million.... First State Bank of Altus is the 65th FDIC-insured institution to fail in the nation this year, and the first in Oklahoma. The last FDIC-insured institution to be closed in the state was American Bank of Commerce, Oklahoma City, on March 26, 1992.

From the FDIC: Stonegate Bank, Fort Lauderdale, Florida, Assumes All of the Deposits of Integrity Bank, Jupiter, Florida

Integrity Bank, Jupiter, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver....

As of June 5, 2009, Integrity Bank had total assets of $119 million and total deposits of approximately $102 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $46 million. ... Integrity Bank is the 66th FDIC-insured institution to fail in the nation this year, and the fourth in Florida. The last FDIC-insured institution to be closed in the state was BankUnited, FSB, Coral Gables, on May 21, 2009.

From the FDIC: First Financial Bank, National Association, Hamilton, Ohio, Assumes All of the Deposits of Peoples Community Bank, West Chester, Ohio

Peoples Community Bank, West Chester, Ohio, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of March 31, 2009, Peoples Community Bank had total assets of $705.8 million and total deposits of approximately $598.2 million. ...

The FDIC and First Financial Bank, N.A. entered into a loss-share transaction on approximately $657.6 million of Peoples Community Bank's assets....

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $129.5 million. ... Peoples Community Bank is the 67th FDIC-insured institution to fail in the nation this year, and the first in Ohio. The last FDIC-insured institution to be closed in the state was Miami Valley Bank, Lakeview, October 4, 2007.

From the FDIC: Crown Bank, Brick, New Jersey, Assumes All of The Deposits of First Bankamericano, Elizabeth, New Jersey

First BankAmericano, Elizabeth, New Jersey, was closed today by the New Jersey Department of Banking and Insurance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of July 16, 2009, First BankAmericano had total assets of $166 million and total deposits of approximately $157 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $15 million. ... First BankAmericano is the 68th FDIC-insured institution to fail in the nation this year, and the second in New Jersey. The last FDIC-insured institution to be closed in the state was Citizens Community Bank, Ridgewood, May 1, 2009.

That is four so far ...

by Calculated Risk on 7/31/2009 03:55:00 PM

As we wait for the first bank failure today, let me start with a comment on house prices:

Tech Ticker has a story on house prices today: Housing Bottom? No, the Mother of All Head Fakes. The house price issue is worth some thought this weekend. Although the seasonal adjustment for Case-Shiller appears insufficient, I checked it with some models, and I think it is calculated correctly. I'll post some thoughts on house prices this weekend.

And on vacant CRE, it is hard to beat this, from the WSJ: Giant Warehouses Dot Phoenix Desert Awaiting Imports That Never Came

Along a 15-mile stretch of desert, amid strip malls and unfinished subdivisions, nearly a dozen giant warehouses sit silent and empty. They are relics of this city's dream of becoming a national warehouse hub ...

Today, an empty, half-mile-long warehouse lingers from that vision. The building's 1.2 million square feet could fit 193 full-size copies of the Statue of Liberty. Its parking lot has room for 292 tractor trailers. But on a recent morning the only signs of life were a security guard's trailer, golf cart and bicycle.
...
"It's not a pretty story," says developer Jonathan Tratt ... Mr. Tratt's warehouse is one of 11 storage complexes completed in southwest Phoenix in 2008, with two more set to be finished this year. Those 13 properties combined will have eight million square feet and are now 86% empty ...

And this is a corollary to bank failures, from the Seattle Times: Frontier Financial to be bought by takeover firm (ht Mark)

Frontier Financial and SP Acquisition Holdings announced this morning a deal that will give Frontier shareholders 2.5 million SPAH shares ...

In March, Everett-based Frontier Financial had agreed to submit to tighter supervision by regulators over the way it lends money and manages its operations.

On Wednesday, the company with $4 billion in assets reported a second-quarter loss of $50 million ... Nonperforming assets accounted for 20.5 percent of the company's total assets at the end of June, up from 3 percent a year ago ...

Probably a number of weaker banks will be acquired this year. It is better than being seized by the FDIC.

Click on graph for larger image in new window.

And finally from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 7/31/2009 02:57:00 PM

From NY Times: House Votes for $2 Billion Fund to Extend ‘Clunker’ Plan (ht Paul)

The House of Representatives voted to provide an emergency $2 billion for the “cash for clunkers” program on Friday, and the White House declared the program very much alive, even though car buyers appear to have already snapped up the $1 billion that Congress originally appropriated.
...
The Senate, which will be in session next week, will take up the program then.
...
“If you were planning on going to buy a car this weekend using this program, the program continues to run,” [Robert Gibbs, the chief White House spokesman] said. “If you meet the requirements of the program, the certificates will be honored.”

by Calculated Risk on 7/31/2009 01:10:00 PM

From an SEC 8-K filed this morning:

As of June 30, 2009, Corus’ subsidiary, Corus Bank N.A. (the “Bank”) had preliminary Tier 1 capital of negative $157 million with a ratio of (2.1)%, and preliminary Tier 1 risk-based capital and total risk-based capital of negative $157 million with a ratio of (3.1)%, as reported in its June 30, 2009 Report of Condition and Income (“Call Report”) filed on July 30, 2009. As of June 30, 2009, the Bank was considered “critically undercapitalized” under the regulatory framework for prompt corrective action (“PCA”).
...
Under the FDI Act, depository institutions that are “critically undercapitalized” must be placed into conservatorship or receivership within 90 days of becoming critically undercapitalized, unless the institution’s primary Federal regulatory authority (here, the OCC) and the Federal Deposit Insurance Corporation (“FDIC”) determine and document that “other action” would better achieve the purposes of PCA.
...
At this point in time ... the Company believes that it is highly unlikely that it will be able to obtain additional outside capital that does not include the provision of substantial assistance by the FDIC or other Federal governmental authorities.
emphasis added

Just a matter of when ...

Also, from the WSJ: Regulators Are Getting Tougher on Banks

Federal regulators have escalated the number of wounded banks they have essentially put on probation ... The Federal Reserve and the Office of the Comptroller of the Currency, two of the primary U.S. banking regulators, have issued more of the so-called memorandums of understanding so far this year than they did for all of 2008, according to data obtained from the agencies under Freedom of Information Act requests.

At the current rate of at least 285 so far, the Fed, OCC and Federal Deposit Insurance Corp. are on track to issue nearly 600 of the secret agreements for the full year, compared with 399 last year. Memorandums of understanding can force financial institutions to increase their capital, overhaul management or take other major steps.

And the FDIC this morning announced twenty-seven cease and desist orders for June.

Consider this your preview for BFF.

by Calculated Risk on 7/31/2009 10:10:00 AM

Note: Any reading below 100 shows contraction for this index.

From the National Restaurant Association (NRA): Restaurant Industry Outlook Remained Uncertain In June as Restaurant Performance Index Declined for Second Consecutive Month

The restaurant industry’s economic challenges continued to persist in June, as the National Restaurant Association’s comprehensive index of restaurant activity declined for the second consecutive month. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 97.8 in June, down 0.5 percent from May and its 20th consecutive month below 100.

“While there are signs that suggest an improvement may be on the horizon, the latest figures indicate that the restaurant industry’s recovery has yet to gain a firm foothold,” said Hudson Riehle, senior vice president of Research and Information Services for the Association. “Restaurant operators continued to report declines in same-store sales and customer traffic in June, and their outlook for sales growth in the months ahead remains mixed.”
...
Restaurant operators also reported negative customer traffic levels in June, marking the 22nd consecutive month of traffic declines.
emphasis added

Click on graph for larger image in new window.

Unfortunately the data for this index only goes back to 2002.

The restaurant business is still contracting, and although not contracting as fast as late last year, the pace of contraction has picked up over the last two months.

Someone must have eaten the green shoots.