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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 46 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on several company... More
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  • Mortgage Bubble Burst Takes Another Bank Down 0 comments
    Jan 22, 2013 12:59 PM

    1st Regents Bank, Andover, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Minnesota Bank, Minnetonka, Minnesota, to assume all of the deposits of 1st Regents Bank.

    Founded May 22, 2001, this was a relatively small bank with 13 full time employees as of September 30, 2012. At year-end 2008 the bank had 20 full time employees. Tier 1 risk-based capital ratio 2.17%

    The largest charge offs were in construction and land development, followed by commercial and industrial loans. As of September 30,2012 this was the loan portfolio:

    Total loans 36,642
    Loans secured by real estate: 28,893
    Commercial and industrial loans 9,052
    Loans to individuals - Other 160
    http://www.ibanknet.com/scripts/callreports/getbank.aspx

    Note the non-current loans and charge offs:

    Non-Current Loans
    2006 0
    2007 $1.4
    2008 $7.5
    2009 $1.8
    2010 $2.0
    2011 $3.9
    9/31 $5.1

    Charge Offs

    2006 0
    2007 $273,000
    2008 $1.27 ($848,000 construction/land development) $428,000 commercial/Industrial)
    2009 $3.5 ($2.2 construction/land, $1.2 commercial/industrial,$57,000 multifamily)
    2010 $1.8 ($1.0 commercial/industrial,$743,000 nonfarm nonresidenial,$83,000 construct/land,$22,000 1-4 family)
    2011 $378,000 ($292,000 construction/land, $68,000 commercial/industrial, $18,000 individuals)
    9/31 $712,000 ( $698,000 commercial/industrial, $21,000 nonfarm/nonr res.,-$12,000 construction/land)

    Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

    When the bank was in formation, there was a boom going on in new hour construction permits:

    1998: 448 buildings, average cost: $119,900
    1999: 411 buildings, average cost: $115,200
    2000: 342 buildings, average cost: $135,200
    2001: 285 buildings, average cost: $152,200
    2002: 218 buildings, average cost: $146,100
    2003: 179 buildings, average cost: $161,900
    2004: 251 buildings, average cost: $144,300
    2005: 226 buildings, average cost: $151,200
    2006: 151 buildings, average cost: $164,500
    2007: 91 buildings, average cost: $201,600
    2008: 129 buildings, average cost: $86,200
    2009: 47 buildings, average cost: $196,700
    2010: 71 buildings, average cost: $207,100
    2011: 58 buildings, average cost: $203,500
    www.city-data.com/city/Andover-Minnesota.html

    Note the decline permits:

    (click to enlarge)

    www.city-data.com/city/Andover-Minnesota.html

    Bring this to most common industries in 2009:

    Manufacturing (21%)
    Construction (17%)
    Retail trade (11%)
    Wholesale trade (6%)
    Transportation and warehousing (6%)
    Finance and insurance (5%)
    Professional, scientific, and technical services (5%)
    www.city-data.com/city/Andover-Minnesota.html

    You have the housing bubble burst, even though this bank was modern, active drive-in, community owned, active on the internet, and obviously the investors tried to save the bank:

    (in millions, unless otherwise)

    Net Equity
    2006 $550,000
    2007 $740,000
    2008 $709,000
    2009 $429,000
    2010 $2.8
    2011 $1.8
    9/31 $924,000

    Profit
    2006 $936,000
    2007 $454,000
    2008 -$1.7
    2009 -$4.6
    2010 -$2.7
    2011 -$1.2
    9/31 -$900,000

    As of September 30, 2012, 1st Regents Bank had approximately $50.2 million in total assets and $49.1 million in total deposits. First Minnesota Bank will pay the FDIC a premium of two percent to assume all of the deposits of 1st Regents Bank. In addition to assuming all of the deposits of the failed bank, First Minnesota Bank agreed to purchase essentially all of the assets.

    The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $10.5 million. http://www.fdic.gov/news/news/press/2013/pr13005.html

    MAP + Loss-Share Agreements in Bank Failures 2013
    http://leasingnews.org/archives/Jan2013/1_17.htm#loss

    List of Bank Failures:
    http://www.fdic.gov/bank/individual/failed/banklist.html

    Bank Beat:
    http://www.leasingnews.org/Conscious-Top%20Stories/Bank_Beat.htm

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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