by Calculated Risk on 8/19/2009 05:03:00 PM

From Bloomberg: BBVA Said to Win FDIC Bidding for Guaranty Financial of Texas

Banco Bilbao Vizcaya Argentaria SA ... was selected to take over the assets of Guaranty Financial Group Inc. in a government-assisted transaction ...

Guaranty might be seized tomorrow - or even today (like what happened with BankUnited after the deal was leaked).

Guaranty will be the second largest failure of the year.

by Calculated Risk on 8/19/2009 04:06:00 PM

From Peter Eavis at the WSJ: Colonial Bank Marks a New Low for Loans

In doing the deal, BB&T is marking down Colonial loans and real-estate collateral by 37%, a number that reflects a large amount of estimated losses. The biggest mark is on construction loans; BB&T is cutting their value by 67%.

And here is the BB&T presentation.

Click on slide for larger image in new window.

Yes, Colonial had some really bad loans. Peter Eavis quoted Daryl Bible, BB&T's chief financial officer: "When we looked at Colonial's portfolio versus ours, we saw a lot of borrowers we turned away."

Still it appears the BB&T / Colonial marks are the lowest yet.

by Calculated Risk on 8/19/2009 01:25:00 PM

From Bloomberg: U.S. Commercial Property Values Fall as Rent Declines Forecast

The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today.
...
“It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report.

The Moody’s survey found a 4 percent increase in office prices in the second quarter compared with the previous three months ... Industrial properties ... fell 20 percent in the quarter, while apartments fell 16 percent and retail properties 8 percent.

I think the office prices increase was an anomaly. Other CRE prices fell much faster.

Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted - that is the name of the company (an unfortunate choice for a price index). Moody's CRE price index is a repeat sales index like Case-Shiller.

Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

This shows residential leading CRE (although we usually talk about residential investment leading CRE investment, but in this case also for prices), and this also shows that prices tend to fall faster for CRE than for residential.

by Calculated Risk on 8/19/2009 11:20:00 AM

As a companion to the Problem Bank List (unofficial), here is a list of failed banks since Jan 2007. Deposits, assets and estimated losses are all in thousands of dollars.

Losses for failed banks in 2009 are the initial FDIC estimates. The percent losses are as a percent of assets.

See description below table for Class and Cert (and a link to FDIC ID system).

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. You can click on the number and see "the last demographic and financial data filed by the selected institution".

by Calculated Risk on 8/19/2009 10:00:00 AM

From Bloomberg: Scholes, Merton Says Banks Should Value Assets Better (ht Brian)

Financial institutions should use mark-to-market accounting or list the hard-to-value securities on public exchanges whenever possible, Scholes said in a Bloomberg Radio interview yesterday. ...

“I’d like to see us encourage many more securities held on the books of the banks be migrated to exchanges if possible,” he said. Doing so would “allow for market discovery and market pricing as much as possible,” Scholes added.
...
“This is not the way forward,” [Merton, Robert Kaplan and Scott Richard] wrote. “While regulators and legislators are keen to find simple solutions to complex problems, allowing financial institutions to ignore market transactions is a bad idea.”

Don't hold your breath.

And from the SEC: Sample Letter Sent to Public Companies on MD&A Disclosure Regarding Provisions and Allowances for Loan Losses (ht LDM)

Clear and transparent disclosure about how you account for your provision and allowance for loan losses has always been critically important to an investor’s understanding of your financial statements. ... Finally, although determining your allowance for loan losses requires you to exercise judgment, it would be inconsistent with generally accepted accounting principles if you were to delay recognizing credit losses that you can estimate based on current information and events. Where we believe a financial institution’s financial statements are inconsistent with GAAP, we will take appropriate action.
emphasis added

Don't hold your breath.

And from the Jackson Hole conference in 1987: Restructuring the Financial System. Concluding remarks from Gerald Corrigan:

Clearly there is a broad-based consensus that something has to be done about restructuring our financial system. There is even a broadbased consensus as to why it has to be done. I certainly would count myself among those who put considerable urgency behind the task of getting it done.

Nothing was done. Hopefully no one held their breath.