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.

FDIC To Dump Nearly $5-Billion in Distressed Assets

Mostly note sales...

FDIC Launching Nearly $5B of Asset Sales

Sep 4, 2009 - CRE News

The FDIC is expected to shortly bring to market a whopping $4.7 billion of mixed quality residential and commercial real estate loans that it assumed from some 20 failed banks.

The assets will be offered through what the agency and its contractors call structured offerings, in that investors will buy only an interest in each portfolio sold, while FDIC will keep the remainder. And the agency is expected to include elements of federal government's proposed public-private investment partnership, or PPIP program, in that it might offer seller financing.

The largest of the offerings will involve $2.7 billion of residential acquisition and development loans that will be marketed through Keefe, Bruyette & Woods, which has handled a number of previous FDIC loan sales.

The other portfolios will each involve roughly $1 billion. Deutsche Bank will offer a package of commercial mortgages, while a venture of Midland Loan Services and Pentalpha Capital Group will handle the sale of a portfolio of commercial acquisition and development loans.

Each of the advisers is said to be close to formally distributing sales announcements, with bid dates expected to be in mid- to late-October.

The agency has so far sold $4.9 billion of assets through six similar structured sales. But it did not offer seller financing for those. It sold stakes of 20 percent and 40 percent in each portfolio, with the interests having a face value of $1 billion. Their sale has generated total proceeds of $209.8 million, or 20.7 percent of the interest's face value.

Those proceeds compare with the 47.7 percent sales price for the $2.9 billion of loans the agency has sold through whole-loan offerings, or what it terms cash sales. Those offerins have been conducted by DebtX and First Financial Network.

Click here for a listing of FDIC's completed loan sales.

But the agency's proceeds in the structured offerings could increase over time.

It's clear that the agency is selling assets at or near the bottom of the market. And investors understand that the agency must sell, especially since banks continue to fail, swelling the FDIC's workload. So the prices at which assets from failed banks sell could be artificially deflated. By keeping a stake, it could theoretically benefit when market conditions and values improve.

Meanwhile, the agency earlier this week took offers for a stake in a $1.4 billion portfolio of residential mortgages taken from Franklin Bank of Houston. The offering, handled by RBS, was the first that adopted the government's Legacy Loan Program, through which the FDIC would provide generous financing to buyers.

Investors competing for the portfolio were asked to bid a price for a 20 percent stake, if they didn't require financing, or 50 percent, if they needed financing. Like in all of FDIC's structured offerings, the investors' stake would grow to 40 percent if certain performance thresholds were met.

The buzz is that the RBS portfolio attracted a high bid of 60 percent of face value. But that could be explained by the fact that 70 percent of the portfolio was comprised of performing mortgages.

LINK

RIP, Colonial Bank

Actually sold them quite a bit of property over the past few years. BB&T likely to take over. RIP.

SAN FRANCISCO (MarketWatch) -- Colonial BancGroup Inc. may become the largest bank failure so far this year.

Shares of Colonial /quotes/comstock/13*!cnb/quotes/nls/cnb (CNB 0.41, -0.06, -11.94%) dropped 12% to 41 cents before being halted Friday morning. News of the looming takeover was reported by Bloomberg News and The Wall Street Journal's online edition.

BB&T Corp. /quotes/comstock/13*!bbt/quotes/nls/bbt (BBT 28.01, +2.21, +8.57%) is expected to take over the Montgomery, Ala.-based bank as early as Friday in what would be the biggest bank failure of 2009, Bloomberg reported, citing an unidentified source close to the matter.

The deal will be supported by the Federal Deposit Insurance Corp., Bloomberg and the Journal reported.

In Washington, FDIC spokesman David Barr declined to comment.

Shares of BB&T rose 5% to $27.08.

Colonial Bank "is probably a manageable purchase although we expect some losses from the purchase," said Egan-Jones Ratings, a rating agency that's paid by investors rather than issuers, in a statement Friday

Two More Banks Seized

Two more down.

Two Sarasota banks are seized and sold
Community National to reopen today, First State on Monday, as Stearns branches

By Michael Braga

Published: Saturday, August 8, 2009 at 1:00 a.m.

Regulators on Friday shut down First State Bank of Sarasota and Community National Bank of Sarasota County, two institutions that played in risky loans during the real estate boom and crumbled when the bubble burst.

The two banks, with a combined $560 million in assets, will reopen as branches of St. Cloud, Minn.-based Stearns Banks, which agreed to take over nearly all the failed banks' assets and property.

Community National's four branches are slated to open today under Stearns' ownership; First State's nine on Monday.

That is good news for a region already buffeted by the closings of Manatee County's First Priority and Freedom banks.

Though Community National and First State will be operating under new management, it is likely that Stearns will need some of the banks' more than 150 workers to operate in its first foray into Florida.

Finding a buyer also is easier on regulators, who have closed 71 federally insured banks so far this year. The two Friday closings bring to six the number of Florida banks that have been shuttered.

"We are very grateful that we found a buyer with the financial wherewithal to do this," said Linda Beavers, the FDIC's regional ombudsman. "It makes our job a lot easier."

Rather than sending deposit checks back to customers, regulators will simply have to account for the deposits and then transfer them to Stearns, a bank with nearly $1 billion in assets and seven branches in Minnesota and Arizona.

But shareholders for both banks were wiped out. First State's shares, which traded on the Nasdaq, was selling for 33 cents on Friday. Volume was more than three times normal the average.

Analysts fully expect more failures this year.

LINK

CRE Loans An Increasing Worry

Very good analysis from CoStar on distressed loans. Sadly, this will be the epicenter of the commercial meltdown in 2009.

CRE LOAN DISTRESS LEVELS ESCALATING RAPIDLY

The distressed loan situation in commercial real estate is taking a striking turn for the worse, according to a CoStar Group analysis of December loan information on more than 83,000 loans in commercial mortgage backed securities.

The level of distressed loans in the CMBS universe was at historically low, and unsustainable levels, in 2008 - less than 1% of outstanding loans. That compares favorably to the level of commercial real estate distress in bank and thrifts where distressed properties made up about 2.32% of their nonresidential portfolios as of Sept. 30.

However, that level of safety in the CMBS universe looks like it could be eroding rapidly.



The amount of loans placed in special servicing - generally an indication of a delinquency or failure to pay off a mature loan - rose dramatically in the fourth quarter - from about $400 million per month in September to more than $1.6 billion in November.


And that trend is likely to continue in the near term as the number of loans identified by CMBS servicers as having potential credit issues more than doubled from about $3.5 billion per month to about $7.5 billion in November.

In preparation for its first market outlook presented last week, CoStar also undertook its first-ever analysis of delinquent and distressed properties in the CMBS market, examining loans with a total value of more than $700 billion.

CoStar identified nearly 1,200 commercial real estate loans that were either delinquent in loan repayments or had reached maturity without pay off of the loan. The principal and interest outstanding on those loans as of mid December totaled nearly $8.2 billion. (Editor’s Note: We identify and detail, the 10 largest of those delinquent/specially serviced loans at the end of this story.)

CoStar also compiled a list of nearly 6,100 additional loans that servicers for those securities have flagged as having potential credit concerns. The current scheduled ending balance of those loans totaled $57.8 billion.

In addition, CoStar identified more than 160 properties that had been repossessed by various CMBS trusts. The properties had a loan value at the time they were taken over of more than $1 billion. Based on the properties most recent valuations, the bondholders were likely to take a loss of more than $300 million. (Editor’s Note: We will identify and detail, the 20 largest of those REO loans in next week’s Watch List column.)

Where CoStar was expecting the number of currently delinquent loans to be in the states with the most commercial real estate, e.g. New York, California, Illinois, Texas, New Jersey, that turned out not necessarily to be the case. The number of delinquent commercial real estate loans appears to closely parallel areas of the country that have suffered most from the crisis in the housing market. In addition, the number of delinquent commercial real estate loans was also high in the industrialized Midwest states:

State, No. of Delinquent CMBS Loans
Texas, 171
Florida, 126
Michigan, 83
California, 81
Georgia, 71
Ohio, 71
New York, 70
Nevada, 42
Arizona, 39
Illinois, 34

Moving forward, however, it appears likely that the number of delinquent loans could start to increase in the population centers. The number of loans that CMBS servicers have placed on their watch lists as having potential credit issues is highest in the following states:

State, Number of Potential Problem Loans
Texas, 890
California, 741
New York, 445
Florida, 432
Ohio, 269
Michigan, 247
Georgia, 219
Arizona, 212
Illinois, 180
Pennsylvania, 180

Looking at delinquencies by property type, it is also apparent that this is a housing-led recession. Most commercial real estate delinquencies are showing up first in multifamily loans and then loans on retail properties as falling housing values have cut into consumer spending.


Going forward, retail properties continue to show potential credit concern but trouble also appears to be brewing in the office sector as well.

CoStar Group’s analysis is in line with Wall Street’s outlook for growth in CMBS delinquencies, which is for a nearly 300% increase in the number of commercial real estate loans that will become delinquent in 2009.

Fitch Ratings' CMBS loan delinquency index rose to 0.64% in November 2008. It projects that delinquencies will continue to rise, reaching approximately 2% by year-end 2009.

Moody's Investors Service's CMBS loan delinquency index rose to 0.75% in November 2008. It projects that delinquencies will continue to rise, reaching its long-term historical average of 1.5% to 2.0% in 2009, and most likely to surpass this level as the market begins to form a bottom in 2010 and 2011.

STORY LINK (with bigger charts)

WaMu Going Down Next?

I heard this from a very good banking source a few weeks back. Everyone's been watching the situation unravel over the past week. WaMu claims to be very well-capitalized, but the future is very uncertain for this bank IMO.

Moody's cuts WaMu's credit rating to below investment grade
By Simon Kennedy
Last update: 3:45 a.m. EDT Sept. 12, 2008
LONDON (MarketWatch) -- Moody's Investor Service downgraded Washington Mutual Inc.'s credit rating to below investment grade late Thursday, citing WaMu's reduced financial flexibility, deteriorating asset quality and expected franchise erosion. The rating agency cut the group's senior unsecured rating to below investment grade at Ba2 from Baa3. It also reduced the long-term deposit and issuer ratings of the banking unit to Baa3 from Baa2, though this rating remains investment grade. Moody's added the outlook for the ratings is negative. In a response, Washington Mutual said it believes the decision to cut its ratings to below investment grade "is inconsistent with the company's current financial position." The firm added Moody's action appears to reflect the uncertainty in the market, rather than a thorough evaluation of its business.