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Christopher "Kit" Menkin is of editor (, 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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  • Arizona Real Estate Failures Take Bank Down---Board Of Directors At Fault 6 comments
    Apr 8, 2013 1:53 PM

    by Christopher Menkin

    The two branches of Gold Canyon Bank, Gold Canyon, Arizona, were closed with First Scottsdale Bank, National Association, Scottsdale, Arizona, to assume all of the deposits. Founded April 26, 2006, the bank had 12 full time employees at year-end 2012 at their office in Gold Canyon and Peoria.

    Gold Canyon is located 40 minutes east of the Phoenix Skyharbor airport, the 2010 census counted a population of 10,064, according to Wikipedia. In reality, the bank was doomed when it first opened and was never profitable. They opened the Peoria branch in 2007, which had a population of 108,364 in the 2000 Census, where the high has gone from 103 degrees in April to 95 in November.

    Here are 117 homes that Gold Canyon Bank foreclosure sale had for sale in Gold Canyon, Arizona:

    (relatively small homes, little landscaping, mostly Arizona country, small, $119,000, $133,900, $159,000, several over $200,000)

    At the time of closing, Gold Canyon still owed the U.S. Treasury $1.55 million for monies received under the TARP bailout program in June 2009. After making three dividend payments to the U.S. Treasury, Gold Canyon stopped making payments on the loan in February 2010.

    Tier 1 risk-based capital ratio 2.92%, end of year 2012, the latest numbers available from the FDIC.

    The bank was doomed when it opened, as it not only opened at the wrong time, but by those interested in real estate promotion, and moving into Peoria in their second year was just a dumb mistake. Gold Canyon Bank never profitable from day one:

    (in millions, unless otherwise)

    2006 -$758,000
    2007 -$1.3
    2008 -$1.9
    2009 -$2.4
    2010 -$1.7
    2011 -$1.0
    2012 -$1.4

    Non-Current Loans
    2006 0
    2007 0
    2008 $636,000
    2009 $17,000
    2010 $993,000
    2011 $2.0
    2012 $3.5

    Net Equity
    2006 $8.9
    2007 $7.6
    2008 $5.9
    2009 $4.8
    2010 $2.6
    2011 $2.4
    2012 $959,000

    December 23 2011 signed an agreement with Federal Reserve Bank of San Francisco and Arizona Department of Financial Institutions to improve their lending practices as well as increase capital, as well as plans for loans over $100,000 and 90 days past due.

    (click to enlarge)

    Gold Canyon Golf Resort

    The Cease and Desist had:
    Carlo Karim, Chairman of the Board, managing partner Gold Canyon Golf Resort since 2001, previously executive director of catering, Hilton New York. Dan Govinsky, Director, President & CEO since January, 2005. Previously president/CEO Valley Bank of Arizona (April, 1997- December, 2003, president/ CE), Bank of Scottsdale (November, 1991-September, 1995)

    (Photo from LinkedIn web site of Aaron Saunders )

    When the bank opened, chairman of the board was Aaron Saunders, Broker/Owner of the MacArthur Reality Group, who February, 2011 was noted on as senior vice-president of sales and marketing for Fairway Commercial Lending.

    The Gold Canyon Bank board also had a mortgage broker firm, a real estate management and investment firm. Heavily run by real estate promoters.

    Press Release re: Opening of Bank and personnel:

    December 23 2011 the bank signed an agreement with Federal Reserve Bank of San Francisco and Arizona Department of Financial Institutions to improve their lending practices as well as increase capital, as well as plans for loans over $100,000 and 90 days past due.

    By the time the year-end came out, it was too late to attract more capital, whether possible earlier or not, it was just too late as non-current loans for this small bank reached $2 million and the bank equity had gone from $8.9 million in 2006 to $2.4 million in 2011.

    Charge Offs
    2006 0
    2007 0
    2008 $233,000 ($126,000 nonfarm-nonres., $107,000 construction-land
    2009 $615,000 ($326,000 construction/land.,$289,000 commercial
    2010 $1.0 ($430,000, $344,000 commercial-ind.,$217,000 1
    4 family,$19,000 indiv.)
    2011 $225,000 ($130,000 commercial-industrial,$117,0000 construction
    land, $8,000 individuals)
    2012 $247,000 ($302,000 nonfarm-nonres.,-$39,000, -$16,000commercial-industrial.)

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

    As of December 31, 2012, Gold Canyon Bank had approximately $45.2 million in total assets and $44.2 million in total deposits. In addition to assuming all of the deposits of the failed bank, First Scottsdale Bank, National Association agreed to purchase essentially all of the assets.

    The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $11.2 million.

    Bank Failure Map--2013 Bank Closed Count:

    List of Bank Failures:

    Bank Beat:

    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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Comments (6)
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  • Westcoaster
    , contributor
    Comments (869) | Send Message
    It's really none of my business, but why does your title say "board of directors at fault"?


    It looked like they had banking and real estate experience going into the founding of this bank and shareholders had at least 8.9 million wiped out.


    Are they at fault because they took the TARP?


    I think any shareholder who invested in a bank in 2006 is sort of at fault also. Just bad timing and bad business move, but does that really make directors at fault?


    Thanks in advance, I always enjoy your posts.
    16 Apr 2013, 12:30 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (99) | Send Message
    Author’s reply » When you have one group who is interested in one aspect
    of business, real estate, their vent is real estate, buy more,
    lend more, take a risk on real estate, and they promoted their friends in real estate, give them very liberal loans, and yes, they brought
    business to the bank---but all in real estate. Very lopsided
    portfolio, and then expanding into another town---just to make
    more real estate loans and no diversification and hell bent
    in one direction. And their timing was awfull!!!
    17 Apr 2013, 12:02 PM Reply Like
  • Westcoaster
    , contributor
    Comments (869) | Send Message
    Yes they definitely lost their money. But I keep looking at these community bank balance sheets and they are for the majority real estate lending banks.


    What 60 to 70 percent of their loans are usually real estate related.


    The problem with this above bank was when they were 60% construction right?


    Also, if I look at my balance sheet or many peoples balance sheets I bet 60% to 70% of their net worth is real estate. So by definition community banks as a reflection of their communities become real estate banks don't they. How can this be criticized?
    22 Apr 2013, 01:07 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (99) | Send Message
    Author’s reply » It is a false assumption to compare your personal life with a business, let alone a bank. A bank can leverage itself greatly, which is their business, taking in deposits, leveraging it into products from giving advice, to check charges, to all types of loans and leases from credit cards to mortgages (most are through Fannie Mae, by the way) with the bank as underwriter. Note the deposits not owned by the bank but then lent out.


    The problem is the board was interested in real estate primarily
    and blinded by that business. It would be like dentists only making loans to other dentists for whatever the dentist wanted to do...all your eggs into one business. If you have 60% of your loans to
    one industry, you are in trouble (period). It you have an accounts
    receivable to 60% and that business is slow in payment, or
    defaults, you are bound to go out of business quickly.


    There are many sound community banks, profitable, and written about here. The chairman and the board take ultimate responsibility
    as that is their role---staff follows their direction and leadership.
    If they don't, they are replaced.


    If you have the time, go to this blog and look at the top 100 and top
    500 community banks and why they are successful. Banking is a very competitive, tough business, and takes a board that represents all parts of the community, not just one interest---which
    happened here---and that is the point of the story.
    23 Apr 2013, 11:45 AM Reply Like
  • Westcoaster
    , contributor
    Comments (869) | Send Message
    Thank you Christopher for the response. I agree with you.


    The investors and the FDIC would have been much better served if this bank had been diversified. You are so correct about a business being highly dependent on one segment of the economy. That's not safe or sound.


    I quite enjoy your blog and stats you provide us. Thanks again....
    23 Apr 2013, 12:08 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (99) | Send Message
    Author’s reply » Having been involved in the founding of two community banks, on the board of one, advisor on two others, being on committees, going through the banker courses, you realize how tough a job it is, especially if you take the responsibility seriously.


    I don't know any other media that goes into the depth I do from free information made available by the FDIC---what a wealth of information!


    Their reports and financial information tell a great deal of the story and what a wonderful job they do.
    24 Apr 2013, 03:01 PM Reply Like
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