by Calculated Risk on 6/26/2010 09:16:00 AM

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

Here is the unofficial problem bank list for June 25, 2010.

Changes and comments from surferdude808:

CR provided a tease earlier on some of changes to the Unofficial Problem Bank List that would be happening as the FDIC released its enforcement actions for May yesterday. As CR predicted, it was a busy week as 24 institutions were added while 8 were removed. Also, the agencies issued numerous Prompt Corrective Action Orders.

Overall, the Unofficial Problem Bank List stands at 797 institutions with aggregate assets of $409.6 billion, up from 781 institutions with assets of $404.5 billion last week. Removals include the failed Peninsula Bank ($644 million), First National Bank ($253 million), and High Desert State Bank ($83 million). The FDIC terminated actions against De Witt State Bank ($39 million), Citizens State Bank of Lankin ($37 million), BankHaven ($22 million), and The Farmers Bank ($18 million). The other removal was for VisionBank of Iowa ($87 million) which merged with its affiliate sister bank -- Ames Community Bank ($383 million) that also happens to be on the Unofficial Problem Bank List as it is operating under a Written Agreement.

There were 24 institutions with aggregate assets of $6.5 billion added to the list this week. Notable additions include Bank of Choice, Greeley, CO ($1.3 billion); Nova Bank, Berwyn, PA ($598 million); CornerstoneBank, Atlanta, GA ($536 million); and Sterling Federal Bank, F.S.B., Sterling, IL ($501 million). Geographically, five institutions from Georgia, three from Missouri, and two from California, Colorado, Illinois, and Pennsylvania were added.

In a sign that the agencies may be taking their regulatory authority seriously, they issued 11 Prompt Corrective Action Orders against institutions on the Unofficial Problem Bank List. Generally, a PCA Order is a narrow enforcement action proscribing for an institution to raise its regulatory capital ratios by a certain date. As way of background, in 1991 via the Federal Deposit Insurance Corporation Improvement Act (FDICIA) Congress mandated for the regulators to take certain actions including closing troubled institutions promptly. The intent was to prevent a recurrence of the "zombie thrifts" that regulators allowed to stay open for many years despite being insolvent, which contributed the large price tag of the last banking crisis. The PCA legislation requires regulators to take certain actions that are triggered by so-called capital trip wires. For example, regulators are supposed to stop an institution from issuing brokered deposits or giving managers golden parachutes when they are no longer "well capitalized." Another trip wire requires for regulators to close an institution when its tangible capital ratio breeches 2 percent. The thinking behind this provision is that closure before equity goes negative would lessen losses to the deposit insurance fund and the potential that taxpayer monies would be needed to support resolutions. Some industry observers believe the regulators have been remiss in enforcing PCA, particularly the timely closing of insolvent institutions. To support this conclusion, observers point to Corus Bank and Guaranty Bank that posted negative equity in their Call Reports several quarters before they were closed or the substantial loss rates on failed institutions that reported satisfactory capital ratios just before failure.

The 11 institutions receiving a PCA Order include LibertyBank ($768 million); Butte Community Bank ($523 million Ticker: CVLL); Metro Bank of Dade County ($442 million); Ravenswood Bank ($301 million); SouthwestUSA Bank ($214 million); Blue Ridge Savings Bank, Inc. ($209 million); Legacy Bank ($169 million); Olde Cypress Community Bank ($169 million); Shoreline Bank ($110 million); Badger State Bank ($93 million); and Thunder Bank ($33 million).

by Calculated Risk on 6/25/2010 09:45:00 PM

From Kenneth Harney in the WaPo: Foreclosure alternative gaining favor (ht ghostfaceinvestah)

There are two programs in Home Affordable Foreclosure Alternatives (HAFA), short sales and deed in lieu of foreclosure.

Harney writes:

Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let's bypass the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home, and we'll call it a deal. ...

The deal can be quick, and the first lender will agree not to pursue a deficiency judgment. However 2nds are a problem, and "deed in lieu" transactions still hit the borrower's credit history.

Borrowers with 2nds considering a "deed in lieu" transaction should contact the 2nd lien holders. HAFA offers a payout to 2nd lien holders in deed in lieu transactions who agree to release borrowers from debt (see point 4 here for payouts under deed in lieu).

Under the HAFA deed in lieu program, the borrower needs to be proactive with 2nd lien holders.

The deed in lieu program is gaining in popularity, from Harney:

Bank of America, has mailed 100,000 deed-in-lieu solicitations to customers in the past 60 days, and its volume of completed transactions is breaking company records, according to officials. ... To sweeten the pot, Bank of America is offering cash incentives that range from $3,000 to $15,000 ... [Matt Vernon, Bank of America's top short sale and deed-in-lieu executive] said.

On the credit impact, from Carolyn Said at the San Francisco Chronicle:

[Craig Watts, a spokesman for FICO] said it is a "widespread myth" that short sales and deeds in lieu of foreclosure have less impact on credit scores than do foreclosures.

"Generally speaking, when you can't pay your mortgage, in the eyes of the FICO score what matters is that you were not able to fill your obligation as you originally agreed and that failure is highly predictive of future risk," he said.

And a video from HAMP / HAFA: "Your Graceful Exit"

by Calculated Risk on 6/25/2010 07:04:00 PM

As the anvil falls
Road running deposits flee
Wiley banker struck
by Soylent Green is People
From the FDIC: First American Bank, Artesia, New Mexico, Assumes All of the Deposits of High Desert State Bank, Albuquerque, New Mexico

As of March 31, 2010, High Desert State Bank had approximately $80.3 million in total assets and $81.0 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $20.9 million. ... High Desert State Bank is the 86th FDIC-insured institution to fail in the nation this year, and the second in New Mexico. The last FDIC-insured institution closed in the state was Charter Bank, Santa Fe, on January 22, 2010.

That makes three today ...

by Calculated Risk on 6/25/2010 06:24:00 PM

Peninsula Bank
Ringed on three sides by water
Way out blocked by Feds

Savannah shut down
Sheila's Summer season starts
Sad situation.
by Soylent Green is People
From the FDIC: Premier American Bank, Miami, Florida, Assumes All of the Deposits of Peninsula Bank, Englewood, Florida

As of March 31, 2010, Peninsula Bank had approximately $644.3 million in total assets and $580.1 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $194.8 million. Compared to other alternatives, ... Peninsula Bank is the 84th FDIC-insured institution to fail in the nation this year, and the fourteenth in Florida. The last FDIC-insured institution closed in the state was Bank of Florida – Southwest, Naples, on May 28, 2010.

From the FDIC: The Savannah Bank, National Association, Savannah, Georgia, Assumes All of the Deposits of First National Bank Savannah, Georgia

As of March 31, 2010, First National Bank had approximately $252.5 million in total assets and $231.9 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $68.9 million. Compared to other alternatives, ... First National Bank is the 85th FDIC-insured institution to fail in the nation this year, and the ninth in Georgia. The last FDIC-insured institution closed in the state was Satilla Community Bank, Saint Marys, on May 14, 2010.

by Calculated Risk on 6/25/2010 04:45:00 PM

Just a BFF (Bank Failure Friday) preview. It looks like surferdude808 will be busy updating the Unofficial Problem Bank list today ... the FDIC released their May Enforcement Actions.

There are eight Prompt Corrective Actions (PCA) for last month ... and that seems especially high.