Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Real Estate Development Loans Continue to Plague Banks


 

Three more bank failures bring the total of the year to 51 as real estate development loans continue to plague both small and regional banks.


 

The seven branches of First Chicago Bank & Trust, Chicago, Illinois, were closed with Northbrook Bank & Trust Company, Northbrook, Illinois, to assume all of the deposits. Founded January 1, 1905, the bank had 125 full time employees March 31, 2011 with three offices in Chicago, one in Bloomingdale, Itasca, Norridge, and Park Ridge; seven.

The parent company of the acquiring bank, Northbank Bank & Trust, is Wintrust Financial Corporation which has $14 billion in assets. Wintrust had borrowed $250 million under the TARP program, repaying it in full in December, 2010. Wintrust had previously acquired four other failed banks with almost $2 billion in assets in 2010 and 2011. In conjunction with the acquisition of First Chicago, Wintrust provided the FDIC with a Value Appreciation Instrument ("VAI") whereby 250,000 units were awarded to the FDIC at an exercise price of $32.00 per unit. The units are exercisable at any time for 180 days after July 8, 2011. If the FDIC exercises the units, Wintrust will be required to pay the FDIC an amount in cash equal to the volume weighted average price of Wintrust common stock over the two trading days immediately prior to the exercise date minus the exercise price, but in no case greater than $8.00 per unit.

As of March 31, 2011, First Chicago Bank & Trust had approximately $959.3 million in total assets and $887.5 million in total deposits. Northbrook Bank & Trust Company will pay the FDIC a premium of 0.50 percent to assume all of the deposits of First Chicago Bank & Trust.

In addition to assuming all of the deposits of the failed bank, Northbrook Bank & Trust Company agreed to purchase approximately $880.7 million of the failed bank's assets.

First Chicago's troubles began in 2008 and by 2009 the bank was in serious condition, needing additional capital very badly; the trend never reversed:

(in millions, unless otherwise)

Net Equity  
2007 $179.7
2008 $151.9
2009 $89.8
2010 $21.9
3/31 $12.0


Profit  
2007 $9.3
2008 -$41.7
2009 -$107.5
2010 -$92.2
3/31 -$10.1


Non-Current Loans  
2007 $9.7
2008 $67.8
2009 $124.9
2010 $111.6
3/31 $98.9


Charge Offs  
2007 -$44,000 (recaptured charge offs)
2008 $3.2
($1.3 L&C, $1.8 commercial & industrial)
2009 $62.9
($24.4 L&C, $3.5 family multi, $17.4 multi family, $13.7 commercial & industrial)
2010 $66.2
($19 L&C, $7.6 family multi, $18.3 multiple family, $17.2 commercial & industrial)
3/31 $10.9
($7.3 L&C, $807,000 multi family, $1.6 commercial and industrial)

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

Tier 1 Capital Risk 1.01%

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $284.3 million.

Wintrust controls nine Illinois-chartered banks:

•Hinsdale Bank & Trust Company
•Lake Forest Bank & Trust Company
•Libertyville Bank & Trust Company
•Northbrook Bank & Trust Company
•North Shore Community Bank & Trust Company
•St. Charles Bank & Trust
•State Bank of The Lakes
•Village Bank & Trust
•Wheaton Bank & Trust
 

One Wisconsin-chartered bank:

•Town Bank

And five nationally-chartered banks:

•Advantage National Bank Group
•Barrington Bank & Trust Company, N.A.
•Beverly Bank & Trust Company, N.A.
•Crystal Lake Bank & Trust Company, N.A.
•Old Plank Trail Community Bank, N.A.

For more information on Wintrust, please go here:
www.wintrust.com/about-wintrust-financia...

http://www.fdic.gov/news/news/press/2011/pr11117.html

 


 

The seven branches of Colorado Capital Bank, Castle Rock, Colorado were closed with First-Citizens Bank & Trust Company, Raleigh, North Carolina, to assume all of the deposits.

Formed April 28, 1998 the bank had 125 full time employees at offices in Boulder, Castler Rock, Colorado Springs, Denver, Edward, and Greenwood Village. In 2007 they had 176 full time employees.

"Colorado Capital grew rapidly earlier this decade by lending for such things as second homes in the mountains, golf course developments and raw land for development," Denver banking analyst Larry Martin told the Denver Post.
www.denverpost.com/business/ci_18444010?...

"The reckless expansion of lending came to a crashing halt and bad end as real estate markets collapsed and borrowers defaulted en masse," wrote problembanklist.com. "Losses to the FDIC for closing Colorado Capital amount to a stunning 40% of total assets indicating a very poor quality of loan underwriting standards."

(in millions, unless otherwise)

Net Equity  
2007 $54
2008 $80
2009 $68.2
2010 $21.4
3/31 $15.8


Profit  
2007 $2.7
2008 $3.4
2009 -$15.1
2010 -$48.0
3/31 -$5.8


Non-Current Loans  
2007 $65,000
2008 $6.3
2009 $10.9
2010 $103.2
3/31 $176.4


Charge Offs  
2007 $418,000
($104,000 nonfarm non residential, $317,000 commercial and residential)
2008 $423,000
($370,000 C&L, $97,000 1-4 family)
2009

$11.4
($7.6 C&L, $649,000 1-4 family multiple $2.8 commercial & industrial)

2010 $17.0
($13.5 C&L, $908,000 1-4 family multiple, $1.7 commercial & industrial)
3/31 $25.1
($18.4 C&L, $6 commercial & industrial,$691,000 multi family

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

Tier 1 risk-based capital ratio 2.71%

As of March 31, 2011, Colorado Capital Bank had approximately $717.5 million in total assets and $672.8 million in total deposits. In addition to assuming all of the deposits of the failed bank, First-Citizens Bank & Trust Company agreed to purchase essentially all of the assets.

The FDIC and First-Citizens Bank & Trust Company entered into a loss-share transaction on $580.0 million of Colorado Capital Bank's assets. First-Citizens Bank & Trust Company will share in the losses on the asset pools covered under the loss-share agreement.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $283.8 million.

http://www.fdic.gov/news/news/press/2011/pr11118.html

 


 

The three branches of Signature Bank, Windsor, Colorado were closed with Points West Community Bank, Julesburg, Colorado, to assume all of the deposits. Formed December 1, 2004 there were 15 full time employees at two offices in Windsor and one in Greely. The organizers of the bank included Robert Hinderaker, who became CEO, Martin Lind, Russ Sanford, Mike Ketterling and Brian Niess. The investment group was comprised of 52 investors, most of whom had an active interest in the Windsor community. They lost their full original investment.

"During the boom years leading up to the real estate meltdown, Signature Bank rapidly expanded its lending in an overheated market," reported problembanklist.com." Assets peaked at $80 million in 2008, coinciding with the top in real estate. The subsequent financial crisis which popped the real estate bubble also sealed the fate of Signature Bank."

(in millions, unless otherwise)

Net Equity  
2007 $7.6
2008 $7.6
2009 $3.9
2010 $3.3
3/31 $1.5


Profit  
2007 $299,000
2008 $16,000
2009 -$3.75
2010 -$771,000
3/31

$1.8



Non-Current Loans  
2007 $1.27
2008 $401,000
2009 $7.4
2010 $2.6
3/31

$5.1



Charge Offs  
2007 -$42,000 (recovered)
2008 $166,000
2009 $569,000
($303,000 C&L, $157,000 1-4 multi, $211,000 commercial, $55,000 credit cards, $55,000 consumer)
2010 $2.6
($936,000 C&L, $714,000 1-4 multi, $829,000 commercial)
3/31

$598,000
($464,000 C&L, $135,000 commercial)


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

Tier 1 risk-based capital ratio 5.79%

As of March 31, 2011, Signature Bank had approximately $66.7 million in total assets and $64.5 million in total deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $22.3 million.

www.fdic.gov/news/news/press/2011/pr1111...

Tracking Bank Failures Map:
http://graphicsweb.wsj.com/documents/Failed-US-Banks.html

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