FDIC Hit for $588.1 million--Bank Investors lose all
Internet, Long/Short Equity, Portfolio Strategy, Banks
Seeking Alpha Analyst Since 2009
Almost all the problems related by the failed banks are real estate development, and while first and second mortgage were of major trouble for the very large banks, for the community and regional banks, construction and land development and related loans were the main culprit. Once the personal guarantees and value of the land was considered to be one of the best, but today there are a lot of ex-millionaire developers and bank stock holders who are disappointed in their friends who talked them into investing.
It is not to say that many of the non-current loans were not first or second mortgages, but the real estate development problems is the most common theme, and for quite some time, too. These banks closed last week by the FDIC, have been in trouble for three to four years, indicating they are more to follow as the FDIC works the marketplace to the best of their ability. Their insurance fund this week was hit for $588.1 million, and many are thankful it wasn't worse.
The hardest hit was Superior Bank, Birmingham Alabama, costing the Deposit Insurance Fund (DIF) will be $259.6 million.
The 73 branches with 824 full-time employees of Superior Bank were closed on Friday, following a story in the Wall Street Journal on Thursday, using this regional bank as an example of how even regional banks are having difficulties that larger banks are able to overcome offering products that smaller banks don't have inroads or experience to enter. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Superior Bank, N.A., Birmingham, Alabama, a newly-chartered bank subsidiary of Community Bancorp LLC, Houston, Texas, to assume all of the deposits of Superior Bank.
What the Wall Street Journal missed by one day is that Superior Bank become the first multi billion dollar banking failure of 2011.
Superior Bank had lost $15.3 million year-end 2010 and $232.2 million year-end 2011 after charges offs of $167.4 million ($90.6 million construction and land development, $21.4 million in 1-4 family residential properties, $17 million multifamily residential properties, $29.9 million in nonfarm non residential property, $5.4 million in commercial and industrial loans, $2.9 million in loans to individuals. Tier 1 risk-based capital ratio: 1.80%
WWW.problembanklist.com notes, "Shareholders of Superior Bancorp have seen the price of their investment drop from $45 dollars per share in 2007 to 28 cents on today’s closing price, resulting in a total loss of almost $600 million."
As of December 31, 2010, Superior Bank had approximately $3.0 billion in total assets and $2.7 billion in total deposits. In addition to assuming all of the deposits of the failed bank, Superior Bank, N.A. agreed to purchase essentially all of the assets.
The Wall Street Journal article mentioned year-end filings not being filled with NASDAQ or other entities; however, the year-end FDIC filings were available, showing a dramatic equity drop from $272.5 million year-end 2010 to $49.2 million year-end 2011 with $266.2 million in non-current loans.
Nexity Bank, Birmingham, Alabama, like Superior stepped into Chapter 11 bankruptcy on July 26, 2010, trying to pull itself together, but was closed last Friday with AloStar Bank of Commerce, Birmingham, Alabama, a newly-chartered bank, to assume all of the deposits of Nexity Bank.
The bank was founded February 22, 1968 and had gone from 105 full time employees in 2010 to 81 by year-end 2011. Equity had dropped from $27.6 million to $958,000 year-end 2011, a minus $3.2 million equity first quarter of this year. The bank had lost $59.2 million year-end 2010, $22.4 million year-end 2011, and $5.7 million the first quarter of this year. Non-current loans were $60.7 million. 2010 charges offs were $44.4 million with $29.8 million in construction and land development and $14.1 million in other loans. Charge offs in 2011 were $7.8 million in construction and land development, $2.6 million in nonfarm nonresidential and 1.9 million in construction and industrial loans and $9 million in other loans. Tier 1 risk-based capital ratio end of year was 1.23% and .000975% with over $19.9 million in past due and nonaccrual loans.
Nexity Bank had offices in Atlanta, Georgia, Columbia, South Carolina, Myrtle Beach, South Carolina and Raleigh, North Carolina. November 1, 1999, the bank acquired all of the outstanding common stock of Peoples State Bank, Grant, Alabama. January 5, 2000: Peoples State Bank's name changes to Nexity Bank, and the main office relocated to Birmingham, Alabama. The branch in Grant, Alabama continued to operate as a traditional bank under the name "People's State Bank."
As of December 31, 2010, Nexity Bank had approximately $793.7 million in total assets and $637.8 million in total deposits. In addition to assuming all of the deposits of the failed bank, AloStar Bank of Commerce agreed to purchase essentially all of the assets.
The FDIC and AloStar Bank of Commerce entered into a loss-share transaction on $384.2 million of Nexity Bank's assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $175.4 million.
Another bank hit with real estate development was the four branches of Bartow County Bank, Cartersville, Georgia, who were closed with Hamilton State Bank, Hoschton, Georgia, to assume all of the deposits. Founded March 28, 1974, the bank had gone from 83 full time employees in 2010 to 67 full time employees by year end 2011. Equity had taken a dramatic drop from $21.4 million to $2.5 million in the same time period.
The bank web site stated:
"Bartow County Bank was started in 1974 by a group of local business people with a vision to help serve the financial needs of Cartersville and the surrounding area.
"At that time, Cartersville was a sleepy little town located 30 minutes north of Atlanta. But, with the completion of interstate 75, things soon changed. Businesses started relocating to our area and tourists found Cartersville, with its varied culture, a nice place to stop. Many tourists even decided to stay permanently. Bartow County Bank has also grown with the area, becoming Bartow County's largest bank. We have seen many community banks bought out by larger banks and many big banks opening locations here."
Fifty miles from Atlanta, the town was not named after President Jimmy Carter but named for Col. Farish Carter. As of the 2000 U.S. census, the population of Cartersville was 29,925. Some population growth has been apparent as the city's population rose to about 41,234 at the U.S. Census Bureau's estimate in 2005. Caught in the boom of Georgia, the bank had lost $11.7 million in 2010 and $18.7 million in 2011 with non current loans and leases of $32.7 million following two years of charge offs in real estate loans, $10.8 million the previous year and $10 million in 2011 ($4.5 million construction and land development, $2.3 million in nonfarm nonresidential properties, $2 million in commercial and industrial loans, $348,000 multiple housing, $148,000 loans to individuals. Tier 1 risk-based capital ratio: 1.09%
As of December 31, 2010, Bartow County Bank had approximately $330.2 million in total assets and $304.1 million in total deposits. Hamilton State Bank will pay the FDIC a premium of 1.0 percent to assume all of the deposits of Bartow County Bank.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $69.5 million.
New Horizons Bank, East Ellijay, Georgia, was closed with Citizens South Bank, Gastonia, North Carolina, to assume all of the deposits. Founded May 21, 2004, they had 22 full time employees.
As of December 31, 2010, New Horizons Bank had approximately $110.7 million in total assets and $106.1 million in total deposits. Citizens South Bank will pay the FDIC a premium of 1.0 percent to assume all of the deposits of New Horizons Bank.
Bank equity end of 2010 was $7.2 million; end of 2011: $485,000. The bank had lost $3.2 million the previous year and in 2011 had lost $6.9 million with $7.9 million in non-current loans. Charge offs in 2011 were $2 million in construction and land development, $380,000 in 1-4 family residences, $250,000 in commercial loans and $1.9 million in "other loans." Tier 1 risk-based capital ratio: 0.37%.
Again, criticism of banks in Georgia dependent on real estate loans; however, the problem was nationwide with the bank structure in Georgia showing the community banks hit the hardest as at one time real estate loans were considered one of the best collateral assets to have. Was the bank overextended or over exuberate. If you were a stockholder, you probably have stronger language to describe the president and board of directors’ stewardship
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $30.9 million.
The eight branches of Heritage Banking Group, Carthage, Mississippi, were closed with Trustmark National Bank, Jackson, Mississippi, to assume all of the deposits. Heritage was established January 1, 1920, made it through the depression, and had 66 full time employees.
Bank equity was $14.9 million year-end 2010 and $4.5 million year-end 2011. The bank had lost $1.9 million year-end 2010 and lost $10.4 million year-end 2011.Non-current loans were $17.5 million. The bank declared $1.8 million in land construction and development, $1.3 million in property secured by 1-4 multifamily residential properties, $533,000 loans to individuals, $124,000 construction and land development, $140,000 secured by farm land, and $298,000 in multifamily residential properties. Tier 1 risk-based capital ratio: 2.71%
As of December 31, 2010, Heritage Banking Group had approximately $224.0 million in total assets and $196.2 million in total deposits. Trustmark National Bank will pay the FDIC a premium of 0.15 percent to assume all of the deposits of Heritage Banking Group. In addition to assuming all of the deposits of the failed bank, Trustmark National Bank agreed to purchase essentially all of the assets.
The FDIC and Trustmark National Bank entered into a loss-share transaction on $156.4 million of Heritage Banking Group's assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $49.1 million.
The 33rd FDIC-insured institution to fail in the nation this year, and the first in Minnesota, was Rosemount National Bank, Rosemount, Minnesota. Central Bank, Stillwater, Minnesota, was chosen to assume all of the deposits. Established October 1, 1982, the bank had 15 full time employees. Central Bank has acquired four closed Minnesota banks and one in Fort Myers, Fla., since the financial crisis began nearly four years ago.
The bank had been under a cease and desist order since April 28, 2010, with the main one to raise additional capital.
As of December 31, 2010, Rosemount National Bank had approximately $37.6 million in total assets and $36.6 million in total deposits. Net equity had gone from $2.9 million year-end 2010 to $899,000 year-end 2011. Noncurrent loans were $1.7 million.
The bank had lost $2.5 million year-end 2010 and $1.8 million year-end 2011 with $941,000 in construction and land development, $15,000 in commercial and industrial loans and $15,000 in loans to individuals. Tier 1 risk-based capital ratio: 2.90%
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.6 million.
Tracking Bank Failures Map:
List of Bank Failures:
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.