by Calculated Risk on 11/19/2010 10:58:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Nov 19, 2010.

Changes and comments from surferdude808:

As anticipated, the Unofficial Problem Bank List rose above 900 as the OCC released its actions through the middle of October 2010 today. Net additions were 5 institutions, which pushed the list total to 903. Assets increased this week by $1.13 billion pushing the aggregate total to $419.6 billion.

There were four removals this week including the three failures -- First Banking Center, Burlington, WI ($822 million); Gulf State Community Bank, Carrabelle, FL ($117 million); and Allegiance Bank of North America, Bala Cynwyd, PA ($116 million). First Banking Center opened in 1920, survived the Great Depression, but did not make it through the Great Recession.

The other removal was the termination of a Supervisory Agreement against The First National Bank of Trenton, Trenton, TX ($147 million) by the OCC. We would not be surprised if the termination is because the Supervisory Agreement is being replaced by a Consent Order.

The nine additions this week include Mid-Wisconsin Bank, Medford, WI ($498 million Ticker: MWFS); First National Bank South, Alma, GA ($335 million); Farmers State Bank, Victor, MT ($323 million); Madison National Bank, Merrick, NY ($305 million); United Americas Bank, National Association, Atlanta, GA ($263 million); San Antonio National Bank, Refugio, TX ($249 million); First Federal Bank, A FSB, Tuscaloosa, AL ($180 million); Santa Clara Valley Bank, National Association, Santa Paula, CA ($140 million); and Sonoran Bank, N.A., Phoenix, AZ ($36 million).

Other changes this week include the Federal Reserve issuing a Prompt Corrective Action Order against Legacy Bank, Milwaukee, WI ($216 million); and the OCC converting a Formal Agreement to a Consent Order against Fidelity Bank of Florida, National Association, Merritt Island, FL ($419 million). We anticipate the FDIC will release its actions for October next week.

The Q3 FDIC Quarterly banking profile will be released soon and will probably show around 900 problem banks at the end of September.

by Calculated Risk on 11/19/2010 07:10:00 PM

Parabolic arc
Escape velocity near
Warp trajectory
by Soylent Green is People
From the FDIC: First Michigan Bank, Troy, Michigan, Assumes All of the Deposits of First Banking Center, Burlington, Wisconsin

As of September 30, 2010, First Banking Center had approximately $750.7 million in total assets and $664.8 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $142.6 million. Compared to other alternatives, First Michigan Bank's acquisition was the least costly resolution for the FDIC's DIF. First Banking Center is the 149th FDIC-insured institution to fail in the nation this year, and the second in Wisconsin.

Three down today with close to $1 billion in assets. A billion here, a billion there ...

by Calculated Risk on 11/19/2010 06:12:00 PM

I pledge allegiance
To perpetual bailout
And justice for none
by Soylent Green is People
From the FDIC: VIST Bank, Wyomissing, Pennsylvania, Assumes All of the Deposits of Allegiance Bank of North America, Bala Cynwyd, Pennsylvania

As of September 30, 2010, Allegiance Bank of North America had approximately $106.6 million in total assets and $92.0 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.2 million. .... Allegiance bank of North America is the 148th FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania.

Two down today ...

by Calculated Risk on 11/19/2010 05:14:00 PM

Note: I started posting bank failures a few years when I was predicting 100s of banks would fail. Since then it has become sort of a Friday afternoon ritual.

Endangered species
Rare Florida solvent bank
So few may exist
by Soylent Green is People
From the FDIC: Centennial Bank, Conway, Arkansas, Assumes All of the Deposits of Gulf State Community Bank, Carrabelle, Florida

As of September 30, 2010, Gulf State Community Bank had approximately $112.1 million in total assets and $112.2 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $42.7 million. ... Gulf State Community Bank is the 147th FDIC-insured institution to fail in the nation this year, and the 28th in Florida.

Another 40% or so loss on assets. Ouch.

by Calculated Risk on 11/19/2010 03:47:00 PM

Treasury released the October HAMP statistics last night.

There is some interesting data on the disposition of canceled HAMP trial modifications. The general view was that a majority of these borrowers would lose their homes in foreclosure or through a short sale. That hasn't happened yet.

The statistics, from the 8 largest servicers (about 80% of HAMP), show that most of these borrowers are in alternative modification programs or have cured the default (current of loan paid off).

Click on graph for larger image in new window.

This graph shows the disposition of canceled HAMP trial modifications (in percentages). This represents 552 thousand canceled trial modifications as of September.

Only 3.9% of borrowers have lost their homes in foreclosure, and another 8.5% have lost their homes through a short sale or deed-in-lieu of foreclosure.

About 13% of borrowers are in the foreclosure process, and another 1.9% in bankruptcy.

So what has happened to the borrowers in all of those canceled trials? The largest percentage of borrowers are in alternative modification programs (lender programs). The next largest group is in "action pending". Some have paid off their loans (probably sold their homes), and another 7.7% have managed to become current.

So the number of foreclosures was lower than many expected, although many of the borrowers in the alternative modification programs will probably redefault (and the action pending group might also results in a number of foreclosures). Hopefully HAMP will keep updating this table.

by Calculated Risk on 11/19/2010 12:04:00 PM

Earlier this week, the NY Fed and the Philly Fed manufacturing surveys were released. The readings couldn't have been more different, with the NY Fed survey showing "conditions deteriorated", and the Philly Fed showing activity improved sharply:

The Empire State Manufacturing Survey indicates that conditions deteriorated in November for New York State manufacturers. For the first time since mid-2009, the general business conditions index fell below zero, declining 27 points to -11.1. The new orders index plummeted 37 points to -24.4, and the shipments index also fell below zero.

And the Philly Fed:

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 1.0 in October to 22.5 in November. This is the highest reading in the index since last December. Indexes for new orders and shipments also improved this month, and each index increased 15 points.

Usually these two surveys are fairly consistent, and this is reminder not to make too much of any one data point! Is manufacturing slowing or is activity picking up again? These two surveys provide opposite answers.

The other regional Fed surveys and the ISM manufacturing index will be released over the next two weeks, and hopefully they will provide some clarity.

The following graph compares the regional Fed surveys with the ISM manufacturing index, including the NY Fed and Philly Fed surveys for November. Averaging the NY Fed and Philly Fed survey suggests manufacturing is still expanding, but at a sluggish pace:

Click on graph for larger image in new window.

The New York and Philly Fed surveys are averaged together (dashed green, through November), and averaged five Fed surveys (blue, through October) including New York, Philly, Richmond, Dallas and Kansas City.

The Institute for Supply Management (ISM) PMI (red) is through October (right axis).

The ISM manufacturing index will released on Dec 1st. The Richmond Fed survey will be released on Tuesday Nov 23rd, the Kansas City Fed survey on Wednesday Nov 24th, and the Dallas Fed survey on Monday Nov 29th.

A slowdown in manufacturing has been one of the reasons I thought GDP growth would slow in the 2nd half of 2010 and into 2011 (this is part of the general sluggish and choppy recovery). My view was based on the end of the inventory adjustment, a slowdown in export growth, and sluggish growth for consumer spending. So the Philly Fed reading was surprising to me.

by Calculated Risk on 11/19/2010 09:30:00 AM

From Bond Girl: Some thoughts on the muni market

I have been somewhat hesitant to write about the recent sharp correction in the muni market, mainly because I do not like wasting my time.
...
My opinion, for whatever it is worth to you, is that there are a handful of factors – mostly unrelated to the relative creditworthiness of muni issuers – that have provoked this correction. These factors are related, and they will likely contribute to volatility going into next year. The first, obviously, is a supply glut. The pending expiration of the Build America Bond (BAB) program has pulled supply forward, and this is going to seesaw over the next several weeks. Since the BAB program was initiated, most issuers have structured their new issues with the sense that they will go to either the tax-exempt or taxable market, whichever is more advantageous at the time. It has been almost completely a supply management game since the market for these bonds was established and munis became truly bifurcated.
...
By allowing muni issuers to sell taxable bonds, the BAB program opened the market up to investors like pensions and foreign investors, who otherwise would not benefit from a tax exemption on the interest income on the bonds and would find tax-exempt yields unappetizing. This program has relieved the supply pressure on the market for essentially two years now, keeping interest rates low.

What is going on now is that muni issuers are scrambling to get deals done to take advantage of the program before it expires, and this is pulling the number of new issues that would ordinarily be coming to market forward. So the looming expiration of the BAB program is creating the very conditions it was created to alleviate. Issuers are very conscious of this fact, and that is why a large number of deals are getting pulled. As more issues get pulled and supply is reduced, there will be some relief on rates, which I think is what happened today. But you can expect that muni issuers will be dancing around this until the program expires at the end of the year, so there will likely be significant volatility. There is also considerable uncertainty as to how supply issues will play out in the first quarter of 2011.

I think it is important to understand that these supply issues are what is driving the muni market - not an imminent default.

by Calculated Risk on 11/18/2010 10:25:00 PM

Here are two speeches from Fed Chairman Ben Bernanke:

Rebalancing the Global Recovery

[O]n its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years. As a society, we should find that outcome unacceptable. Monetary policy is working in support of both economic recovery and price stability, but there are limits to what can be achieved by the central bank alone. The Federal Reserve is nonpartisan and does not make recommendations regarding specific tax and spending programs. However, in general terms, a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits would be an important complement to the policies of the Federal Reserve.

And on China:

The exchange rate adjustment is incomplete, in part, because the authorities in some emerging market economies have intervened in foreign exchange markets to prevent or slow the appreciation of their currencies. ... why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals? The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development. This strategy, which allows a country's producers to operate at a greater scale and to produce a more diverse set of products than domestic demand alone might sustain, has been viewed as promoting economic growth and, more broadly, as making an important contribution to the development of a number of countries. However, increasingly over time, the strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy.

And from Bernanke: Emerging from the Crisis: Where Do We Stand?

In the United States, we have seen a slowing of the pace of expansion since earlier this year. The unemployment rate has remained close to 10 percent since mid-2009, with a substantial fraction of the unemployed out of work for six months or longer. Moreover, inflation has been declining and is currently quite low, with measures of underlying inflation running close to 1 percent. Although we project that economic growth will pick up and unemployment decline somewhat in the coming year, progress thus far has been disappointingly slow.

Reports on the speeches:

From the NY Times: Bernanke Speech Offers Support for Obama Policy

From Bloomberg: Bernanke Steps Up Stimulus Defense, Turns Tables on China

From the WSJ: Bernanke Takes Aim at China

by Calculated Risk on 11/18/2010 06:33:00 PM

This week the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q3 2010. Although this data is Not Seasonally Adjusted (NSA), it shows the trends for several key housing categories.

Click on graph for larger image in new window.

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

The number of units built for rent increased sharply in Q3. Although still fairly low, there were 40 thousand rental units started in Q3 2010, almost double the 22 thousand started in Q3 2009. With the rental vacancy rate starting to fall - and no more ill-conceived homebuyer tax credits on the horizon - rental unit construction has probably bottomed. This increase in construction will help a little with employment.

The number of condo units started doubled from last year too - but from close to zero (from 5 thousand in Q3 2009 to 6 thousand last quarter).

The largest category - starts of single family units, built for sale - decreased to 75,000 in Q3 from 92,000 in Q2. Some of this was seasonal, and some was related to end of the tax credit. Starts of owner built units declined in Q3 too.

And an update by request ...

This graph shows single family housing starts and the unemployment rate (inverted) through October. Note: Of course there are many other factors too, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts (blue) rebounded a little last year,and then moved sideways for some time, before declining again in May.

This is what I expected when I first posted the above graph in August 2009. I wrote:

[T]here is still far too much existing home inventory, a sharp bounce back in housing starts is unlikely, so I think ... a rapid decline in unemployment is also unlikely.

Until the excess housing inventory is reduced, housing starts will stay depressed, and the unemployment rate will probably stay elevated. It does appear progress is being made reducing the excess inventory, but it will take some time. To reduce the excess inventory requires new household formation to be higher than housing starts - and even though housing starts are near record lows, new household formation has also been sluggish - partially because there are few construction jobs!

by Calculated Risk on 11/18/2010 02:51:00 PM

From HotelNewsNow.com: STR: Chain scales report strong weekly results

Overall, the industry’s occupancy increased 11.1% to 58.4%, ADR was up 2.7% to US$98.77, and RevPAR ended the week up 14.1% to US$57.65.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

On a 4-week basis, occupancy is up 9.2% compared to last year and 6.1% below the median for 2000 through 2007.

Note: Even though the occupancy rate is above the level of the same week in 2008, and RevPAR (revenue per available room) is up 14.1% compared to the same week in 2009 - RevPAR is still down 3.7% compared to the same week in 2008 - and the 2nd half of 2008 was a very difficult period for the hotel industry.

This suggests some increase in business travel - and probably a little more business confidence (the spring and fall are mostly business travel).

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com