Orion & Century Bank Shut Down

Two more local banks go down.

Regulators shut 2 Fla. banks; 122 failures in '09
Regulators close Orion Bank and Century Bank in Florida; 122 US bank failures this year

* By Marcy Gordon, AP Business Writer
* On 7:49 pm EST, Friday November 13, 2009

WASHINGTON (AP) -- Regulators on Friday shut down two Florida banks, boosting to 122 the number of U.S. bank failures this year as loan defaults rise in the worst financial climate in decades.


The Federal Deposit Insurance Corp. took over Orion Bank, based in Naples, Fla., with about $2.7 billion in assets and $2.1 billion in deposits, and Sarasota-based Century Bank, with $728 million in assets and $631 million in deposits.

IberiaBank, based in Lafayette, La., agreed to assume all of Orion Bank's deposits and $2.4 billion of its assets, as well as Century Bank's deposits and $706 million of its assets.

The FDIC will retain the rest for eventual sale.

In addition, the FDIC and IberiaBank agreed to share losses on roughly $1.9 billion of Orion Bank's loans and other assets, and on about $656 million of Century Bank's.

Orion Bank's 23 branches will reopen Saturday as offices of IberiaBank. Century Bank's 11 branches will reopen during normal business hours, starting on Saturday.

The failure of Orion Bank will cost the federal deposit insurance fund an estimated $615 million; that of Century Bank, $344 million.

With the two closings, 11 Florida banks have failed this year. Failures also have been concentrated in California, Georgia and Illinois.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions out of the federal deposit insurance fund. It has fallen into the red.

To replenish the fund, the FDIC on Thursday mandated the roughly 8,100 insured banks and savings institutions pay about $45 billion in premiums in advance that would have been due over the next three years. It is the first time the agency has required prepaid insurance fees. The idea is for banks to spread the costs over three years rather than paying a one-time fee that would deplete their capital reserves.

The FDIC expects the cost of bank failures to grow to about $100 billion over the next four years.

Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. The FDIC still has about $21 billion cash in loss reserves apart from the insurance fund. It can also tap a Treasury Department credit line of up to $500 billion.

Last week brought the closure of the fourth-biggest bank to fail this year: San Francisco's United Commercial Bank, with $11.2 billion in assets. East West Bancorp Inc., parent of East West Bank of Pasadena, Calif., agreed to buy all of United Commercial's deposits and most of its assets.

Banks have been especially hurt by failed real estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.

If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks hold large concentrations of these loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.

The 122 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $28 billion so far this year. They compare with 25 last year and three in 2007.

The number of banks on the FDIC's confidential "problem list" jumped to 416 at the end of June from 305 in the first quarter. That's the most since June 1994. About 13 percent of banks on the list generally end up failing, according to the FDIC.

Is The Bottom Near? Forecast Says So.

Tough to say.

I'm of the belief that rents in certain areas of town cannot go much lower at this point. I have a few properties where, after the pass-through expenses are stripped out of the gross rental figure, the owner is maybe taking in $0.50 a foot or even less at the end of the day. Doesn't leave much room for error. And even with these record low rents, tenants are tough to come by. In some of these cases, theoretically, the property is probably worth more vacant than with a credit tenant in place. Sad but true.

Pricing anything is very difficult due to a lack of reliable comps. I get some ridiculous "drive-by" sign calls from people offering $20/ft for halfway decent downtown property. Can't blame 'em for trying, I guess!

Emerging Trends: "The Bottom is Near!" Predict CRE Forecasters
Most Market Forecasters See a Pricing Bottom Next Year, and at Least One Prognosticator Suggests that Transaction Pricing for Institutional Investment-Quality Real Estate May Have Already Bottomed in the Third Quarter

By Randyl Drummer

November 4, 2009

Having reviewed the next round of commercial real estate surveys, forecasts and emerging trends issued this past week for 2010, about the only good news appears to be that the market has hit bottom -- or will soon. Rents and values have continued to fall across virtually every commercial real estate sector and across almost every market.

However, forecasters see the prospect for near-term opportunity once the markets bottom out, bringing a long-expected deluge of loan workouts, write downs, defaults and foreclosures -- along with the time-tested rush by patient, cash-rich investors, who, with some fortunate timing, will be able to tap some very attractive buying opportunities at bottom-of-the-cycle prices.

Also, leasing activity is expected to increase as tenants seek to take advantage of sharply lowered rents, resulting in more potential commissions for brokers, but also likely resulting in more pressure on highly leveraged building owners.

At least five major surveys and forecasts have been released since late last week by such influential industry groups as Real Estate Roundtable, the MIT Center for Real Estate, the National Multi Housing Council and NAIOP. PricewaterhouseCoopers and the Urban Land Institute released one of the industry's most widely watched surveys, the annual Emerging Trends in Real Estate, on Thursday morning.

The surveys tend to confirm the 2010 projections made last month by CoStar and its newly acquired analytics and forecasting advisory firm, Property Portfolio and Research Inc. (PPR), which were among the first forecasts to be released. The office vacancy rate stood at 13% at the end of the third quarter, and CoStar forecasts several more quarters of negative absorption and another 300-basis-point increase in the vacancy rate to 16% as the office market trails what's shaping up to be a "jobless recovery." Strong demand for office space is not expected to return until 2011-12, but when it does recovery should be robust, with the national office vacancy rate expected to fall to 10.5% by 2014 if job numbers begin to pick up as expected, according to CoStar and PPR projections.

Looking ahead, CoStar forecasts that the national industrial vacancy rate will rise from 10.2% in the third quarter to as high at 11% next year, but the amount of negative net absorption -- which approached nearly 150 million square feet year to date through the end of the third quarter -- should taper off over the next couple of quarters. The industrial market will slowly resume leasing activity starting in mid-2010, generating reasonably strong positive quarterly absorption through 2013. Rents, however, likely will remain moribund for two or three more years.

Coming off an idle 2009, the next year will likely rank as the slowest year of the modern era for new development, according to projections covering US market conditions presented by CoStar in a series of webinars last month.

A record 900 people participated in this year's Emerging Trends in Real Estate 2010 survey by PricewaterhouseCoopers and ULI. The results won't do much to either comfort the pessimists or encourage the optimists.

Across the board, investor sentiment was at or near record lows. Survey respondents predicted that vacancies will rise and rents will fall in all property types before the market hits bottom next year. Only apartments rated as a "fair" prospect, with all others sinking into the fair to poor range, with respondents especially bearish on retail and hotels. Development prospects ranged from "dead" and "abysmal" to "modestly poor."

"Not surprisingly, the overwhelming sentiment of Emerging Trends interviewees remains decidedly negative, colored by impending doom and distress over prospects for an extended period of anemic demand and costly deleveraging," the report said.

On the other hand, value declines of 40% to 50% off 2007 peaks will present once-in-a-generation opportunities, respondents said. "A sense of nervous euphoria is growing among liquid investors who can make all-cash purchases” from distressed sellers and banks, said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank.

Debt markets will begin to recover, but loans will be conservative, expensive, and extended only to a lender's best customers. REITs and private equity funds will get into the action, providing loans to battered borrowers at a steep price.

The survey finds near-record lows in investment sentiment in every property type. Only apartments registered fair prospects with all other categories sinking into the fair to poor range. Hotel and retail record the most precipitous falls. Development prospects are “largely dead” and drop to new depths and practically to “abysmal” levels for office, retail and hotels. Warehouse and apartments scored only marginally better at “modestly poor.”

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