BankEast acquired by U.S. Bank

BankEast was a $261MM bank at the time that the failed they had just over $36MM in late and non performing real estate loans and REO. Their capital adequacy ratios were .45 and .89 for tier 1 and total respectively (if you don’t know what this means or why you should care when you’re working with banks then sign up for the free email mini course).

BankEast leaves behind $10,583,000 in commercial real estate, just $495,000 in multifamily, $22,852,000 in construction, and $2,223,000 in residential REO and troubled loans. Substantially all of these assets will undoubtedly be liquidated by U.S. Bank under an FDIC loss sharing agreement. The FDIC press release makes no mention of this however the Purchase and Assumption Agreement do reference residential and commercial loss sharing.

Patriot Bank of Minnesota acquired by First Resource Bank

The FDIC said this of the agreement in their press release

The FDIC and First Resource Bank entered into a loss-share transaction on $79.4 million of Patriot Bank Minnesota’s assets. First Resource Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector.

Patriot Bank’s troubled assets consisted mainly of construction loans and REO although they did also have a modest amount of commercial real estate ($3.9MM).

First Guaranty Bank & Trust of Jacksonville acquired by CenterState Bank

First Guaranty is the second failed bank that CenterState Bank in Florida has acquired recently, the other was Central Florida State Bank.

First Guaranty had roughly $120MM in troubled real estate assets the bulk of which are loans on  non owner occupied commercial real estate however they also struggled with and left behind construction, multifamily, residential, and agricultural late and non performing loans and REO.

The FDIC had this to say about it:

The FDIC and CenterState Bank of Florida, National Association entered into a loss-share transaction on $292.9 million of First Guaranty Bank and Trust Company of Jacksonville’s assets. CenterState Bank of Florida, National Association will share in the losses on the asset pools covered under the loss-share agreement.

I should think Florida’s investors should be talking to CenterState for sure.

Tennessee Commerce Bank acquired by Republic Bank

Tennessee Commerce Bank bequeathed just over $60MM in problem real estate loans and REO either the FDIC or to Republic Bank. More than half of the assets were commercial real estate almost all of said total was comprised of nonaccrual  loans on owner occupied commercial real estate.

Notably Tennessee Commerce also had more than $18MM in multifamily split evenly between non-accrual loans and REO.

The FDIC said this:

As of September 30, 2011, Tennessee Commerce Bank had approximately $1.185 billion in total assets and $1.156 billion in total deposits. In addition to assuming all of the deposits of the failed bank, Republic Bank & Trust Company agreed to purchase approximately $203.9 million of the failed bank’s assets. The FDIC will retain most of the assets for later disposition.

Presumably some of these assets will eventually show up on the FDIC’s Real Estate Assets for Sale list, but don’t look for that to happen too fast…

Click on any of the thumbnails below for a larger view.

As you may already know by now three banks were closed on on January 20th. In this post we’ll take a look at warning signs that existed and the REO and non-performing loan portfolios they left behind.

The banks that failed were located in Pennsylvania, Georgia, and Florida:

• American Eagle Savings Bank (previously regulated by the OTS, no data available)- Boothwyn, PA acquired by Capital Bank, N.A.
• The First State Bank – Stockbridge, GA acquired by Hamilton State Bank
• Central Florida State Bank – Belleview, FL acquired by CenterState Bank of Florida, N.A.

All three of the banks suffered to one degree or another from bad real estate investments and the acquiring institutions will take these assets on to their balance sheets under loss share agreements.

American Eagle Savings Bank

Unfortunately we’re still waiting for the banks that were previously report through the OTS (now the OCC) to report in a more standard way so that their data is available so for the moment we don’t have details on American Eagle Savings’ problem portfolio. American Eagle Savings was a single branch outfit so don’t expect to see too much coming out of there. Here’s what the FDIC had to say about it.

As of September 30, 2011, American Eagle Savings Bank had approximately $19.6 million in total assets and $17.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, Capital Bank, National Association agreed to purchase essentially all of the assets.

The First State Bank

Click to Enlarge

The First State Bank of Stockbridge last reported $516MM in assets. The total for their late and non performing loans and REO including commercial, multifamily, construction and residential assets was… ready?… $190,042,000! That means that 36.8% of this bank’s assets were late, non performing, or OREO.

Needless to say their ratios were down the tubes and if you were working with them you’ve wasted your time. The good news is that their assets will transfer to Hamilton State Bank so you should contact them and let them know you’re familiar with some of the assets.

The FDIC and Hamilton State Bank entered into a loss-share transaction on $419.5 million of The First State Bank’s assets. Hamilton State Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers.

The First State Bank’s troubled assets included $40MM in commercial real estate assets, $131MM in construction related assets (real estate), and $18.6MM in residential assets. Go get em!

Central Florida State Bank

Click to Enlarge

Central Florida State Bank was quite small with approximately $79.4MM in total assets of which about 21% were late an non performing real estate loans or REO. The bank was taken over by CenterState bank of Florida ($1.9B in assets).

The bank left behind $16.8MM in late and non performing real estate loans and REO including $7.7MM in commercial real estate assets, $111,000 in multifamily assets, $7.2MM in troubled construction loans and REO, and $1.8MM in residential problems.

The FDIC said this of the assets:

The FDIC and CenterState Bank of Florida, National Association entered into a loss-share transaction on $53.6 million of Central Florida State Bank’s assets. CenterState Bank of Florida, National Association will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers.

The people I’m talking to expect that the smaller banks will continue to get squeezed out this year. If you’re out there servicing or buying from community and regional banks do your homework and don’t invest a bunch of time with banks that can’t or won’t sell.

You can do the work yourself or you can have our BankProspector software do it for you, but either way expect guard your time this year and pursue the best qualified prospects.

As with previous bank failure reviews the last reported capital adequacy ratios were (obviously) low. Additionally the pattern of these struggling banks showing very limited charge-offs, even with significant non-accrual volume continues. As I’ve discussed in past posts banks that aren’t showing charge-offs but have non-accrual loans are in denial and are not good prospects for non performing note or REO sales.

The FDIC reports “The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Southshore Community Bank will be $8.3 million and for LandMark Bank of Florida, $34.4 million.

The closings are the 56th and 57th FDIC-insured institutions to fail in the nation so far this year and the eighth and ninth in Florida. The last FDIC-insured institution closed in the state was First Peoples Bank, Port Saint Lucie, on July 15, 2011.”

LandMark Bank of Florida Sarasota FL acquired by American Momentum Bank
Tier 1 Risk Based -0.1 %
Total Risk Based -0.1 %
57% of their residential loans were in non accrual or else already REO

Southshore Community Bank Apollo Beach FL acquired by American Momentum Bank
Tier 1 Risk Based 2.61 %
Total Risk Based 3.89 %
42% of their commercial real estate was in late or non accrual status or else REO. 59% of their residential was late or non performing or in REO.

The FDIC said “The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $213.6 million. … Bank of Choice is the 58th FDIC-insured institution to fail in the nation this year, and the fifth in Colorado. The last FDIC-insured institution closed in the state was Signature Bank, Windsor, on July 8, 2011.”

Bank of Choice Greeley CO acquired by Bank Midwest, N.A.
Tier 1 Risk Based 3.47 %
Total Risk Based 4.77 %
20% of their non owner occupied commercial real estate portfolio was late or non performing. 17% of multifamily late or non performing.

Just because a bank has REO or non performing loans, even in large volume, that doesn’t mean they can sell or even that they want to sell, even if they’re talking or acting like sellers.

Side Note: Members will notice that we’re now showing late and non-performing C&I, auto loans, credit cards, and other household personal debt on all our bank records. This will give us a more holistic view, and more prospecting opportunities for note buyers, of what’s happening at any given bank. More about this in a future post.

McIntosh State Bank, Jackson GA – Failed

Could we have known, before we started calling on McIntosh State Bank that they were not long for this world? Yes. Most definitely we could and here’s why.
Capital Adequacy Ratios

• Tier 1: 1.27%
• Total 2.54%

Nonaccrual vs Charge Offs:

• Commercial $12,378,000 – $1,000
• Construction $7,854,000 – $0
• Residential $6,694,000 – $1,000

Look at these nonaccrual vs charge-off numbers above. Is it even possible that this bank is being honest about the value of that they’re holding? Numbers like this are a clear sign that the bank is unwilling and/or unable to sell at real market prices.

Healthy banks will have a minimum tier 1 CAR of 4% and a total CAR of 8% or more. When banks are inadequately capitalized and they’re not charging anything off they will not sell late or non performing loans or REO because they can’t afford to. Because if they do and they’re not able to achieve the values that they have the assets at on their books their ratios will plunge further and the sale would only serve to hasten their demise.

On what some would say is the positive side McIntosh had booked in a good portion of the problems as REO. On the negative side quarter after quarter they failed to sell, as you can see in the 4 quarters chart from BankProspector that I attached here.

First Commercial Bank of Tampa Bay, Tampa FL – Failed

First Commercial bank of Tampa was small, real small. The fact is that yes they were undercapitalized and real estate took a big bite out of them.
Capital Adequacy Ratios

• Tier 1 2.05%
• Total 3.35%

Quite simply this bank had an inordinately high rate of default and not a lot of capital. Over 30% of their commercial real estate portfolio was in late or non accrual status or else in REO. More than 29% of their multifamily portfolio was in nonaccrual.

When a loan goes into ‘nonaccrual’ status it means that there is no longer any hope of that loan being repaid according to terms. This is where you’ll find most of your loan purchase/sales opportunities but again, you want to find a bank that is healthy enough to sell.

McIntosh was acquired by Hamilton State Bank which is exceptionally well capitalized, and Hamilton will be taking commercial and residential assets under loss share agreements.

Stonegate is also very strong though it appears from the assumption agreement that Stonegate will not be taking any assets under loss share agreements. This likely means that the FDIC will be disposing of those assets.

Summit Bank Burlington, WA
If you’ve read some of my posts you know I point to Capital Adequacy Ratios as the indicator to determine whether or not a bank is fit to sell or if they’re merely zombies roaming the country side waiting to be closed. Summit Bank in WA was holding out with a Tier 1 of 2.08% and a Total of 3.34%. Minimum standards for these are 4% and 8% respectively.

Summit Bank had roughly $13 Million in imminent real estate problems including a big bump in residential loans in the process of foreclosure. See the charts below that show pretty clearly what was going on. We can’t say for sure that it was the real estate that brought them down without further investigation but with only $3.2 million in loss reserves and $13 million in distressed real estate or loans it seems likely.

Click on any of the bank charts below for a larger view. Notice the towering red column on the right. That shows residential loans in the process of foreclosure.

First Georgia Banking Franklin, GA
First Georgia was limping along with a Tier 1 and a Total Risk Based CAR of 1.37% and 2.64% respectively (very low).

First Georgia left behind over $73 million in late or non performing real estate loans and REO including $16MM in commercial, $4.1MM in multifamily, $27.2MM in construction and $25.5MM in residential.

First Georgia had only $1.5MM in Loan Loss Provisions (ALLL). They had sold no non accrual assets last quarter and their charge-offs were almost non existent, all are indicators that this bank really wasn’t being honest with itself about the value of their assets and probably a number of other things. They were likely hanging on to their jobs as long as possible and have now bequeathed this real estate gift which will no doubt show up as loss share balances on CertusBank’s balance sheet, the acquiring institution.

Atlantic Southern Bank Macon, GA
Atlantic Southern Bank which was also consumed by CertusBank reported Tier 1 and Total CARs at only 1.2% and 2.4%. They sold no non accrual assets last quarter, they lost more than $1.2MM on the REO they booked in and they had Loan Loss Provisions at a paltry $270K.

Atlantic Southern Bank was home to nearly $120MM in distressed, late and non performing real estate and REO with the bulk of their problems in the form of $51MM in bad construction loans and REO and commercial real estate problems clocking in at $33.9MM.

As you look at these banks I think the lesson to take from this is that you should qualify the institutions you’re prospecting. If I lived in Georgia and the word on the street was that First Georgia Bank and Atlantic Southern had boku product in the form of REO and non performing loans, without all of the information I might be inclined to pursue that ‘opportunity’. I’d probably take people out to lunch and follow up regularly. I’d now doubt get some addresses and drive halfway across the state to provide auction estimates or maybe a BPO and at the end of the day it would be for not because with numbers like this they’re going nowhere, they’re literally just waiting to die.

More information on the individual agreements with the acquiring banks can be found at the FDIC website. All of the data and charts for this report were gathered from BankProspector by distressedpro.com

This is significant for obvious reasons, not the least of which is that banks are going to be MUCH more motivated to sell REO and nonaccrual loans that are covered under loss sharing agreements.

New in BankProspector: See Which Banks are Holding What Assets Under Loss Sharing Agreements

Starting April 30th 2011 BankProspector will let you search and sort for banks with these agreements. The data is even better than that, you’ll be able to see exactly what’s covered under the agreement. I don’t know about you but I think this is pretty exciting stuff. The new report includes the following assets:

Loans Secured by Real Estate

1. 1-4 family residential construction loans
2. Other construction loans and all land development and other land loans
3. Secured by farmland
4. Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit
5. Closed-end loans secured by 1-4 family residential properties secured by 1st liens
6. Closed-end loans secured by 1-4 family residential properties secured by junior liens
7. Secured by multifamily (5 or more) residential properties
8. Loans secured by owner-occupied nonfarm nonresidential properties
9. Loans secured by other nonfarm nonresidential properties
10. Commercial and industrial loans

Other loans

1. Credit cards
2. Automobile Loans
3. Other consumer loans
4. Lease financing receivables

We’ll probably start by showing just the real estate loans but I have had some call for consumer and C&I debt info so we’re looking into adding that as well.

For each of the loan categorie you’ll be able to see the loan totals in 30-89 day late, 90 day late, and nonaccrual status. Nice!

and REO including…

1. Construction land development and other development loans
2. Farmland
3. 1-4 Family Residential Properties
4. Multifamily (5 or more) residential properties
5. Commercial properties

And if you’re a geek like me you’ll also be interested to see the portion of the OREO covered by the loss sharing agreement. This is fairly big stuff if you know what you just read and it could potentially change who you’re approaching and how. I’m ready to hear a different opinion on that but I think I’m right.

Stay tuned for more updates on the way.

Hope you find this video informative.

I have no special knowledge, other than that from the BankProspector analysis, about Chestatee Bank in Georgia but I do know a few things. First I’ll mention that I saw this bank on a recent list as having the highest Texas Ratio of any bank in the U.S. I didn’t verify that data but I did see it. I looked the bank up in BankProspector. They have a Tier 1 Capital Ratio of 1.03%, recent requirements for Tier 1 and Tier 1&2 were recently 4% and 8% respectively. That means this bank is low, they have almost no reserves compared to the non-accrual loans and REO on their books. I also know that they have $20MM in construction REO on their books, I love that I could sell that all day long. But wait, for some reason they’ve been doing nothing but growing their construction REO balance for more than a year!

I was not surprised then when I saw Chestatee show up not 10 days later on the FDIC failed banks list. A little bit of knowledge could save a lot of time penetrating an account like this where they couldn’t sell and in the end won’t even be around to close whatever deals you might have been working on.

Chestatee did have an REO List Chestatee Bank REO List (172), I’d suspect they’re ready to sell now. One note about this list, you’ll notice that these properties are all local to the bank and that’s exactly what we might expect when prospecting local and regional banks.

Learn more about how BankProspector will accelerate your access to non-performing loan and REO opportunities nationwide.

If we look at the hot spots of the situation, Illinois has the most failed banks in 2010, with a total of ten (10) institutions that have gone under this year alone. Florida is a close second with nine (9) bank failures in 2010. According to our research, bank failures have in significant part been due to construction and multifamily distressed assets.

Yesterday, the FDIC announced a torrent of bank closures in Illinois, which caused the state’s bank failure rate to spike to 10. The latest list of bank failures include Wheatland Bank, Peotone Bank and Trust Company, Lincoln Park Savings Bank, New Century Bank, Citizens Bank and Trust Company of Chicago, Broadway Bank, and Amcore Bank National Association. The FDIC is on pace to shatter the failed bank count of 140 set in 2009.

Sun American Bank, Boca Raton, Florida

The FDIC, in conjunction with the Florida Office of Financial Regulation, closed Sun American Bank on March 5, 2010. At the same time, First-Citizens Bank & Trust Company and the FDIC entered into a loss-share transaction on $433.0 million of Sun American Bank’s assets assuming all of the deposits of the failed bank.

Sun American Bank had approximately $535.7 million in total assets and $443.5 million in total deposits by December 31, 2009, and the 12 branches of Sun American Bank will be reopened as branches of First-Citizens Bank & Trust Company.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for this individual closure will be $103.8 million. Sun American Bank is the 23rd FDIC-insured institution to fail in the nation this year, and the fourth in Florida.

Distressed Pro’s BankProspector shows weak capital adequacy ratios at Sun American, $63 million in non-accrual distressed asset totals and over $10 million in OREO. The bulk of the institution’s distress was centered in commercial and construction loan asset types.

Bank of Illinois, Normal, Illinois

Recently, the Bank of Illinois was closed by the FDIC and the Illinois Department of Financial Professional Regulation – Division of Banking. This failure represents the third FDIC-insured banking institution to close in Illinois and the 24th to fail in the nation this year. Heartland Bank and Trust Company of Bloomington, Illinois has assumed all of the deposits of Bank of Illinois, approximately $211.7 million in total assets and $198.5 million in total deposits. The 2 branches of Bank of Illinois have reopened as branches of Heartland Bank and Trust Company.

Bank of Illinois was burdened by distress in their construction and residential loan portfolios, and was carrying OREO balances over $1 million in both multifamily and commercial asset types.

Waterfield Bank, Germantown, Maryland

Waterfield Bank of Germantown, MD is the first bank to fail in Maryland this year. Unique to Waterfield Bank is the fact that the failed institution had a solo branch location and namely took deposits from customers via the Internet and 38 affinity groups.

Waterfield Bank had $155.6 million in assets and $156.4 million in deposits by December 31, 2009. At the time of closing, the amount of deposits exceeding FDIC insurance limits totaled approximately $407,000. Depositors with more than $250,000 at Waterfield Bank should call the FDIC at (800) 830-4735 to make an appointment to discuss the status of their funds.

Waterfield Bank was troubled with negative capital adequacy ratios, and distress mainly in their construction and residential loan portfolios, where 23% and 16% was non-current respectively.

Centennial Bank, Ogden, Utah

Centennial Bank of Ogden, UT was closed on March 5, 2010 by the FDIC in conjunction with the Utah Department of Financial Institutions. Zions First National Bank of Salt Lake City accepted the failed bank’s direct deposits from the federal government

The FDIC was unable to find another financial institution to take over the banking operations of Centennial Bank and brokered deposits will be wired once brokers provide the FDIC with the necessary documents to determine if any of their clients exceed the insurance limits. Customers who placed money with brokers should contact them directly for more information about the status of their funds.

The failed bank is the 26th FDIC-insured institution to fail this year and the second in Utah. It had approximately $215.2 million in total assets and $205.1 million in total deposits by December 31, 2009 and approximately $1.8 million in uninsured funds by the time of closing.

The cost of the failure to its DIF is estimated to be $96.3 million. BankProspector shows that Centennial Bank was burdened with significant construction loan portfolio distress, capital adequacy ratios between 1% and 3%, and OREO balances over $35 million.