by Calculated Risk on 9/05/2009 07:59:00 AM

From Floyd Norris at the NY Times: Construction Loans Falter, a Bad Omen for Banks

Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.
...
It is in commercial real estate construction — be it stores or office buildings — that the pain seems likely to rise. At the end of June, $291 billion in such loans was outstanding, down only a few billion from the peak reached earlier this year.

“On the commercial side,” said Matthew Anderson, a partner in Foresight Analytics, a research firm based in Oakland, Calif., “I think we are fairly early in the down cycle.”

See the great charts in the article.

The article makes the point that the local and regional banks were unable to compete with the larger banks for credit card loans (and residential mortgages too). So the smaller banks ended up overweighted in Construction & Development (C&D) and CRE loans. That isn't look good now, and most of the bank failures during the next couple of years will probably be because of CRE and C&D defaults.

I was looking back at some old posts, and I started writing about how CRE typically follows residential real estate back in 2006, and also about the excessive C&D and CRE loans concentrations of local and regional banks. Here is an excerpt from a post in March 2007:

The housing crisis is now front page news, but there is little discussion about U.S. bank exposure to CRE loans. If a CRE slump follows the residential real estate bust (the typical historical pattern), then the U.S. commercial banks might have a serious problem.

The pattern is always the same: residential leads, CRE follows. And some lenders (and developers) never learn.

by Calculated Risk on 9/04/2009 09:55:00 PM

A few posts earlier today:

Problem Bank List (Unofficial) Sep 4, 2009 (5 more banks failed today)

Employment Report: 216K Jobs Lost, 9.7% Unemployment Rate

Unemployment: Stress Tests, Unemployed over 26 Weeks, Diffusion Index

Employment-Population Ratio, Part Time Workers, Average Workweek

From the SEC: Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme - Public Version - :

The other NERO examiner noted that “[a]ll throughout the examination, Bernard Madoff would drop the names of high-up people in the SEC.” Madoff told them that Christopher Cox was going to be the next Chairman of the SEC a few weeks prior to Cox being officially named. He also told them that Madoff himself “was on the short list” to be the next Chairman of the SEC.
emphasis added

Note: first posted at the WSJ Washington Wire.

The Corus auditor resigned. From a SEC 8-K filing today (ht jb):

On August 31, 2009, Corus Bankshares, Inc. (the “Company”), received notification from Ernst & Young, LLP (“E&Y”) of their resignation as the Company’s independent registered public accounting firm.

There was no disagreement with the auditor, but I guess E&Y isn't sticking around for the FDIC party.

And a Cease & Desist for Granite Bank in North Carolina, from The Charlotte Observer: Bank of Granite under “cease and desist” order (ht Surferdude808)

Regulators have placed Bank of Granite Corp. under a so-called “cease and desist” order, the bank announced this afternoon.

But what makes this one a little unusual:

Known for being conservative and thrifty, it was once praised by Warren Buffett as one of the best-run banks in the country.

And here is a puzzle for you all (via Surferdude808). On the FDIC cert site, Platinum Community Bank is listed as having $148 million in assets. However, when the bank was seized today, the FDIC noted:

Platinum Community Bank, as of August 29, 2009, had total assets of $345.6 million and total deposits of $305.0 million.

Did this bank really more than double their assets in 60 days? (Update: probably is related to the bank holding company)

by Calculated Risk on 9/04/2009 09:13:00 PM

Five fail this Friday
First State Bank falls forcefully
Feds funds are famished.
by Soylent Green is People
From the FDIC: Sunwest Bank, Tustin, California, Assumes All of the Deposits of First State Bank, Flagstaff, Arizona

First State Bank, Flagstaff, Arizona, was closed today by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Sunwest Bank, Tustin, California, to assume all of the deposits of First State Bank.
...
As of July 24, 2009, First State Bank had total assets of $105 million and total deposits of approximately $95 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $47 million. .... First State Bank is the 89th FDIC-insured institution to fail in the nation this year, and the third in Arizona. The last FDIC-insured institution closed in the state was Union Bank, National Association, Gilbert, on August 14, 2009.

Five more today ... so far.

by Calculated Risk on 9/04/2009 08:08:00 PM

Lustre of pyrite
Platinum Bank now fools gold
Shut by tin star Fed
by Soylent Green is People
From the FDIC: FDIC Approves the Payout of Insured Deposits of Platinum Community Bank, Rolling Meadows, Illinois

The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of Platinum Community Bank, Rolling Meadows, Illinois. The bank was closed today by the Office of Thrift Supervision, which appointed the FDIC as receiver.

The FDIC will mail customers checks for their insured funds on Tuesday, September 8. Platinum Community Bank, as of August 29, 2009, had total assets of $345.6 million and total deposits of $305.0 million.
...
Platinum Community Bank is the 88th FDIC-insured institution to fail this year and the 15th in Illinois. The last bank to be closed in the state was Inbank, Oak Forest, earlier today. The FDIC estimates the cost of the failure to its Deposit Insurance Fund to be approximately $114.3 million.

No one wanted this one. That makes four today.

by Calculated Risk on 9/04/2009 07:13:00 PM

InBank, Vantus Bank
Small fries, not big potatos
Is a whopper next?
by Soylent Green is People
From the FDIC: MB Financial Bank, National Association, Chicago, Illinois, Assumes All of the Deposits of InBank, Oak Forest, Illinois

InBank, Oak Forest, Illinois, was closed today by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of August 3, 2009, InBank had total assets of $212 million and total deposits of approximately $199 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $66 million. ... InBank is the 86th FDIC-insured institution to fail in the nation this year, and the 14th in Illinois. The last FDIC-insured institution closed in the state was Mutual Bank, Harvey, on July 31, 2009.

FDIC: Great Southern Bank, Springfield, Missouri, Assumes All of the Deposits of Vantus Bank, Sioux City, Iowa

Vantus Bank, Sioux City, Iowa, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of August 28, 2009, Vantus Bank had total assets of $458 million and total deposits of approximately $368 million. ...

The FDIC and Great Southern Bank entered into a loss-share transaction on approximately $338 million of Vantus Bank's assets. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $168 million. .... Vantus Bank is the 87th FDIC-insured institution to fail in the nation this year, and the first in Iowa. The last FDIC-insured institution closed in the state was Hartford-Carlisle Savings Bank, Carlisle, on January 14, 2000.