by Calculated Risk on 7/23/2010 07:16:00 PM

Desert oasis
Once flush green brown shifts to fail
Viva, lost wages
by Soylent Green is People
From the FDIC: Plaza Bank, Irvine, California, Assumes All of the Deposits of SouthwestUSA Bank, Las Vegas, Nevada

As of March 31, 2010, SouthwestUSA Bank had approximately $214.0 million in total assets and $186.7 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $74.1 million. ... SouthwestUSA Bank is the 102nd FDIC-insured institution to fail in the nation this year, and the fourth in Nevada. The last FDIC-insured institution closed in the state was Nevada Security Bank, Reno, on June 18, 2010.

That makes six today.

by Calculated Risk on 7/23/2010 06:10:00 PM

Century mark gone
Whomever is last standing
Please turn out the lights
by Soylent Green is People
From the FDIC: IBERIABANK, Lafayette, Louisiana, Assumes All of the Deposits of Sterling Bank, Lantana, Florida

As of March 31, 2010, Sterling Bank had approximately $407.9 million in total assets and $372.4 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $45.5 million. ... Sterling Bank is the 97th FDIC-insured institution to fail in the nation this year, and the eighteenth in Florida. The last FDIC-insured institution closed in the state was Metro Bank of Dade County, Miami, on July 16, 2010.

From the FDIC: Renasant Bank, Tupelo, Mississippi, Assumes All of the Deposits of Crescent Bank and Trust Company, Jasper, Georgia

As of March 31, 2010, Crescent Bank and Trust Company had approximately $1.01 billion in total assets and $965.7 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $242.4 million. ... Crescent Bank and Trust Company is the 98th FDIC-insured institution to fail in the nation this year, and the tenth in Georgia. The last FDIC-insured institution closed in the state was First National Bank, Savannah, on June 25, 2010.

From the FDIC: First Citizens Bank and Trust Company, Inc., Columbia, South Carolina, Assumes All of the Deposits of Williamsburg First National Bank, Kingstree, South Carolina

As of March 31, 2010, Williamsburg First National Bank had approximately $139.3 million in total assets and $134.3 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $8.8 million. .... Williamsburg First National Bank is the 99th FDIC-insured institution to fail in the nation this year, and the fourth in South Carolina. The last FDIC-insured institution closed in the state was Woodlands Bank, Bluffton, on July 16, 2010.

From the FDIC: The Bennington State Bank, Salina, Kansas, Assumes All of the Deposits of Thunder Bank, Sylvan Grove, Kansas

As of March 31, 2010, Thunder Bank had approximately $32.6 million in total assets and $28.5 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $4.5 million.... Thunder Bank is the 100th FDIC-insured institution to fail in the nation this year, and the first in Kansas. The last FDIC-insured institution closed in the state was SolutionsBank, Overland Park, on December 11, 2009.

From the FDIC: Roundbank, Waseca, Minnesota, Assumes All of the Deposits of Community Security Bank, New Prague, Minnesota

As of March 31, 2010, Community Security Bank had approximately $108.0 million in total assets and $99.7 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $18.6 million. .... Community Security Bank is the 101st FDIC-insured institution to fail in the nation this year, and the seventh in Minnesota. The last FDIC-insured institution closed in the state was Pinehurst Bank, St. Paul, on May 21, 2010.

by Calculated Risk on 7/23/2010 05:11:00 PM

It might be a little surprising, but existing home sales are still above the historical median level of the last 40 years as a percent of owner occupied units ...


Click on graph for larger image in new window.

The first graph shows existing home sales on an annual basis, and end of year inventory. For 2010, sales are estimated at 5.0 million units and year end inventory at 3.4 million units (currently 4.0 million in June, but inventory will decline seasonally).

The second graph shows the same information normalized by the number of owner occupied units.

Because of the high number of low end foreclosures (investor buying), and various government programs (tax credit, etc.) the number of existing home sales have stayed fairly high.

The median for sales is about 6.1% of owner occupied units or currently about 4.6 million sales per year.

The median for inventory is about 3.1% of owner occupied units or just over 2.3 million units (about 6 months of inventory).

As distressed sales move into the mid-to-high priced areas and investor activity declines, I expect turnover will slow, and overall sales will probably decline to the median level over the next year or two. This is below most forecasts ...

The NAR forecast for 2011 is 5.6 million existing home sales. So I'll take the under.

by Calculated Risk on 7/23/2010 02:15:00 PM

Here are the European bank stress test results by country and bank. From MarketWatch: Seven European banks fail stress tests

Since there are plenty of reports on the stress tests, I'd like to comment on three housing related reports that readers have emailed me today ...

   1) The FHA

There are some reports out today that the FHA is "broke". This is based on an entry in the Federal Register that I reported on last week. What is important about the notice is the FHA is tightening standards - like cutting seller concessions in half - and this is the public notice of these changes. These changes will become effective after the 30 day comment period - or in mid-August.

But the "breaking" reports focused on this statement in the Federal Register:

A recently issued independent actuarial study shows that the Mutual Mortgage Insurance Fund (MMIF) capital ratio has fallen below its statutorily mandated threshold.

Uh, that is not news. The study was released back in November 2009!

   2) Fed MBS Program

There is a story out today about how the Fed was still buying MBS after March 31st! That would be news, but the evidence was that MBS was still showing up on the Fed's balance sheet.

I covered this several times, but it takes a few months for the purchases to settle on the Fed's balance sheet (see: the discussion from SIFMA: "To-Be-Announced" Trading of Agency Passthrough Securities). Here is what I wrote in March:

The coming increase in the Fed's balance sheet (and the expansion of the Supplementary Financing Program (SFP) over the same period) are related to the MBS settling on the Fed's balance sheet. Now that the short term liquidity facilities are finished - the balance sheet will increase by about $200 billion over the next couple of months as the remaining MBS settle.

The Fed stopped buying on March 31st (I even predicted some people would be fooled by the increase of the Fed's balance sheet!).

Update: I'm not referring to this Bloomberg story about a minor adjustment in holdings.

   3) Lenders holding REO off market

There is a report arguing lenders are sitting on a huge amount of REO. I disagree with the methodology in the report (I corresponded with the author). In my view, better (and much lower) estimates come from Barclays and housing economist Tom Lawler.

See: Barclays Lowers REO Inventory Estimate and Lawler's REO: Agencies vs. Private Label

Final Note: My goal is to let everyone know what I know - my intention is not to embarrass anyone (so no links to the articles). If I'm receiving these articles (multiple times) others are probably reading them too. Heck, I'm concerned about the FHA (but this report is not new news) and housing in general. The situation is bad enough ...

by Calculated Risk on 7/23/2010 12:01:00 PM

Here are the Committee of European Banking Supervisors (CEBS) aggregate results.

The aggregate Tier 1 ratio, used as a common measure of banks’ resilience to shocks, under the adverse scenario would decrease from 10.3% in 2009 to 9.2% by the end of 2011 (compared to the regulatory minimum of 4% and to the threshold of 6% set up for this exercise). The aggregate results depend partly on the continued reliance on government support for currently 38 institutions in the exercise.
...
For the institutions that failed to meet the threshold for this stress test exercise, the competent national authorities are in close contact with these banks to assess the results of the test and their implications, in particular in terms of need for recapitalisation.

Results of the individual banks and statements on follow-up actions, where needed, are provided by the banks participating in the exercise and/or their national supervisory authorities.
...
CEBS will publish a summary of the 91 individual bank results, sorted by country, under this page at 18:30 CEST (17:30 BST). Links to the webpages of the participating national supervisory authorities will be activated at the same time.

So the details will be available shortly.

The WSJ reports: German financial supervisors say Hypo Real Estate is the only German bank to fail stress test. All Dutch banks pass. All Spanish listed banks pass.

CNBC reports: Portuguese, Dutch, Italian Banks Pass Stress Test, All German Banks Except HRE Pass, France Top 4 Banks Pass

Reuters reports: Several Spanish Savings Banks Fail Stress Test: Report

by Calculated Risk on 7/23/2010 09:57:00 AM

Tech Ticker quotes Euro Pacific Capital's Peter Schiff:

"I don't know where anyone thinks prices are falling," Schiff says, citing rising prices for food, healthcare and energy. "I don't know where most people do their shopping but I don't see falling prices. To me, prices are rising."

And from Reuters:

Safeway executives said the strength of that push on pricing caught them by surprise.

"Deflation continues in price per item and is not expected to significantly improve until the fourth quarter," said Chief Executive Steve Burd, who oversees supermarkets including Safeway, Vons and Dominick's.

Burd acknowledged that retail deflation was much greater than expected in the second quarter and drove a decline in identical-store sales.

Maybe Schiff should shop at Safeway.

More seriously there is little deflation so far, but general deflation would be a bad bad thing.

by Calculated Risk on 7/23/2010 08:42:00 AM

From Bloomberg: Hungary Credit Rating May Be Cut to Junk After IMF Talks Fail

Standard & Poor’s said it is reviewing Hungary’s credit rating for possible downgrade after the collapse of negotiations with the International Monetary Fund and European Union. A cut would give Hungary’s debt a junk rating.

From Reuters: Ratings agencies threaten Hungary with downgrade

Moody's placed Hungary's Baa1 local and foreign currency government bond ratings on review, citing increased fiscal risks after the International Monetary Fund and the European Union suspended talks over their 20 billion euro ($25 billion) financing deal at the weekend.

by Calculated Risk on 7/22/2010 09:47:00 PM

Click on graph for larger image in new window.

This graph shows the Notices of Default (NOD) by year through 2009, and for the first half of 2010, in California from DataQuick.

Although the pace of filings has slowed, it is still very high by historical standards.

From DataQuick: California Mortgage Defaults Hit Three-Year Low; Foreclosures Rise

The number of California homes pushed into the formal foreclosure process between April and June dropped for the fifth consecutive quarter to the lowest level in three years. The declines were greatest in the most affordable areas, where foreclosure activity continues to fall from extremely high levels over the past two years, a real estate information service reported.

A total of 70,051 Notices of Default ("NODs") were filed at county recorder offices during the April-to-June period. That was down 13.6 percent from 81,054 for the prior quarter, and down 43.8 percent from 124,562 in second-quarter 2009, according to San Diego-based MDA DataQuick.

Last quarter's total was the lowest since second-quarter 2007, when 53,943 NODs were recorded. The peak was in first-quarter 2009 when 135,431 homeowners received foreclosure notices.

"Obviously, motivated sellers and accommodating lenders have played a part in bringing the default filings down, especially when it comes to short sales. Public policy has also been a factor. We also need to remember that prices have come up off bottom over the past year. If they continue to rise, fewer homeowners will find themselves under water, which is a significant factor in letting a home go," said John Walsh, DataQuick president.
...
The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost at the end of the foreclosure process, totaled 47,669 during the second quarter. That was up 11.2 percent from 42,857 for the prior quarter, and up 4.4 percent from 45,667 for second-quarter 2009. The all-time peak was 79,511 in third- quarter 2008.

As I've noted before, in terms of new NOD filings the peak was probably in 2009. A few key points:

Because of the number of homes in the foreclosure pipeline, the number of distressed sales (foreclosures and short sales) will probably increase throughout 2010 - even as NODs decline.

As prices fall later this year, we might see another pick up in NODs.

Although NODs will decline in 2010 from 2009, the number will still be very high. The number of filings in the first half alone is at the peak of the previous housing bust.

by Calculated Risk on 7/22/2010 06:04:00 PM

Tomorrow the Committee of European Banking Supervisors (CEBS) will release the stress test results for 91 European Banks.

The results will be released at 6:00 PM CEST (Central European Summer Time). That would be noon ET, although a few reports have suggested earlier release times (perhaps time conversion problems - something I'm familiar with).

Here is the press release on timing:

The results of the stress test will be released, both on an aggregated and on a bank-by-bank basis, on 23 July 2010, starting at 18.00 hrs CEST.

At 18.00 hrs CEST, CEBS will publish on its website the results of the exercise on an aggregated basis, in the form of a summary report, accompanied by a press release presenting the main conclusions as regards the resilience of the EU banking sector.

From 18.00 hrs CEST, the banks' individual results of the exercise will be published by banks and/or their national supervisory authorities, on their respective websites.

A summary of the 91 bank-by-bank results, sorted by country, will be republished on CEBS’s website with links to the websites of the participating national authorities, foreseen around 18.30 hrs CET.

A restricted press conference will be held at CEBS’s premises in London at 19:00 hrs CEST. Invitations will be sent separately. A broadcast of the press conference will be available via CEBS’s website.

In advance, here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of July 21st):

Click on graph for larger image in new window.

From the Atlanta Fed:

Peripheral European bond spreads (over German bonds) have declined from recent highs but remain extremely elevated.

Since the June FOMC meeting, the 10-year Greece-to-German bond spread has narrowed by nearly 40 basis points (bps) (from 8.01% to 7.62%) through July 20. Other European peripherals’ spreads have also narrowed, with Portugal lower by 25 bps over the period and Spain 24 bps lower.

Note: The Atlanta Fed data is a couple days old. Nemo has links to the current data on the sidebar of his site.

Here are the spreads for the 10-year relative to the German bonds:

Country	Spreads July 22nd	Spreads July 7th	Spreads June 16th	Spreads June 2nd
Greece	7.75%	7.64%	6.40%	5.03%
Portugal	2.88%	2.75%	2.74%	1.95%
Ireland	2.77%	2.62%	2.83%	2.19%
Spain	1.7%	2.06%	2.09%	1.62%

With the exception of Spain, the spreads have widened a little over the last couple of weeks.

by Calculated Risk on 7/22/2010 03:27:00 PM

Note: on Existing Home sales, please see:Existing Home Sales decline in June and Existing Home Inventory increases 4.7% Year-over-Year

The Department of Transportation (DOT) reported that vehicle miles driven in May were up just 0.1% compared to May 2009:

Travel on all roads and streets changed by +0.1% (0.3 billion vehicle miles) for May 2010 as compared with May 2009.
...
Cumulative Travel for 2010 changed by -0.1% (-1.6 billion vehicle miles).

Click on graph for larger image in new window.

This graph shows the rolling 12 month total vehicle miles driven.

On a rolling 12 month basis, vehicle miles driven are mostly moving sideways. Miles driven are still 2.0% below the peak - and only 0.6% above the recent low.

Back in 2008, vehicle miles turned strongly negative on a "month over the same month of the prior year" basis, and that was one of the pieces of data that helped me correctly predict oil prices would decline sharply in the 2nd half of 2008. So far we haven't seen a sharp decline in vehicle miles - and also not a strong increase.