FDIC Seizes Seven Banks in Metropolitan Region
From: "FDIC Seizes Seven Banks in Metropolitan Region", The Business Ledger, Jeremy Stoltz, 5/5/2010
On April 23, Harris N.A., a part of BMO Financial Group acquired certain assets and liabilities of Rockford-based AMCORE Bank, N.A. from the Federal Deposit Insurance Corporation (FDIC), effective immediately.
“The FDIC's effort to help bring greater stability to the industry is something we are pleased to support,” said Bill Downe, president and CEO of BMO Financial Group. “This is a perfect strategic fit that accelerates our growth strategy and reinforces our already strong position in the U.S. Midwest.
“The addition of this franchise – quality locations and a valuable customer base – supports our current market share and expands Harris' branch network into communities in northern Illinois and southern Wisconsin, including Madison and Rockford, where we already have a strong and growing commercial banking presence.”
The 52 branches of AMCORE reopened as Harris on April 24. Deposits of former AMCORE customers will remain insured by the FDIC up to the applicable federal deposit insurance limits and they can continue to access their money by writing checks and using their debit cards or ATMs. Checks drawn on AMCORE will continue to be processed, and loan customers should continue to make payments as usual.
Financial highlights of the transaction include:
• The assumption of approximately $2.1 billion in deposits.
• Acquisition of approximately $2.5 billion in assets, including approximately $2.0 billion in loans.
• All loans are covered by an 80/20 loss share agreement, with the FDIC covering 80 percent of potential loan losses.
• Approximately $2.4 billion in trust, investment and brokerage assets under management.
• The transaction is not material to BMO Financial Group earnings or capital.
FDIC deposit insurance is $250,000 per depositor per institution through December 31, 2013. For more information on FDIC deposit insurance, please visit www.fdic.gov.
MB Financial, Inc., (MBFI) announced that its subsidiary, Chicago-based MB Financial Bank, N.A., acquired the deposits and loans of two Chicago-based banks – Broadway Bank and New Century Bank – at the close of business on April 23 in a transaction facilitated by the FDIC. These are MB’s fifth and sixth FDIC-assisted transactions since 2009.
Broadway Bank failed after suffering heavy losses on commercial real estate loans and was unable to raise $85 million needed to keep it solvent. The bank’s loan problems were highlighted by the FDIC’s estimates of the losses its insurance fund will incur from each of the failures. Broadway is not even one-third the size of AMCORE, yet the FDIC estimated its failure would cost the fund $394 million, while AMCORE’s would only cost $220 million.
Highlights of the transaction include:
• Acquiring $1.1 billion in deposits and $1.2 billion in assets of Broadway Bank.
• Acquiring $486 million in assets and $492 million in deposits of New Century Bank.
Two of its wholly-owned subsidiary banks of Wintrust Financial Corporation – Northbrook Bank & Trust Company and Wheaton Bank & Trust Company – in two FDIC-assisted transactions, have respectively acquired certain assets and liabilities and the banking operations of Lincoln Park Savings Bank and Wheatland Bank.
Lincoln Park Savings Bank operates four locations in Chicago and had approximately $205 million in total assets and $171 million in total deposits as of December 31, 2009.
Wheatland Bank has one location in Naperville and had approximately $435 million in total assets and $438 million in total deposits as of December 31, 2009. In connection with the acquisitions, Northbrook and Wheaton entered into loss sharing agreements with the FDIC, which cover substantially all of the acquired loans and foreclosed real estate.
Lincoln Park Savings Bank transaction
Northbrook Bank & Trust Company assumed the outstanding deposits of Lincoln Park Savings Bank for a premium of approximately 0.4 percent and acquired approximately $190 million of assets – subject to final adjustments – at a discount of approximately 10.7 percent. The acquired assets are subject to loss-sharing agreements with the FDIC, whereby Northbrook Bank & Trust Company will share in losses and the FDIC will cover 80 percent of the losses of certain loans and foreclosed real estate at Lincoln Park Savings Bank.
Locations of Lincoln Park Savings Bank reopened April 24 and now operate as branches of Northbrook Bank & Trust Company
Wheatland Bank transaction
Wheaton Bank & Trust Company assumed the majority of the outstanding deposits of Wheatland Bank for a premium of approximately 0.4 percent and acquired approximately $380 million of assets – subject to final adjustments – at a discount of approximately 16 percent. The acquired assets are subject to loss-sharing agreements with the FDIC, whereby Wheaton Bank & Trust Company will share in losses and the FDIC will cover 80 percent of the losses of certain loans and foreclosed real estate at Wheatland Bank.
Wheatland Bank's single location reopened April 24 and now operate as a branch of Wheaton Bank & Trust Company.
Itasca-based First Midwest Bank acquired Peotone Bank in Peotone, taking on $130 million in assets and $127 million in deposits.
Bank lending trends - 1Q 2010 estimates
Final figures for the first quarter 2010 are not due out for another month (late May), but based on earnings reports and call report filings from many smaller banks, Foresight Analytics offers its advance estimates of what final 1Q 2010 real estate and business loan delinquency results will be.
Note: these are preliminary estimates, not the final results.
Residential mortgages (first-lien single family mortgages)
• Total delinquencies rose to a preliminary estimate of 14.0 percent during the first quarter, up from 13.2 percent in the fourth quarter 2009 and from 9.4 percent a year ago.
• Nonaccrual rates rose by 0.5 percent, from 5.0 percent to an estimated 5.5 percent during the fourth quarter. This is another new high for the nonaccrual rate since at least 1992, the beginning point for our data.
• A peak in the delinquency rate has proven elusive, as the severe price declines in many markets and the depth of the recession have led to increased distress. Nevertheless, with the beginnings of economic recovery and what appears to be a bottom in home prices, we expect the peak in delinquencies to occur during 2010.
• Total delinquencies rose to an estimated 19.0 percent, up from 18.6 percent in Q4. This rate is very close to the 19.2 percent peak in Q1 1992.
• Nonaccruals are driving the increase, rising to an estimated 14.6 percent in Q1, up from 14.3 percent in Q4 and 9.8 percent in Q1 2009.
• While for-sale residential construction loans – single family and condo – are by far the main source of problems, our estimates indicate that delinquency rates for other construction sectors, including apartments and commercial properties, are on the rise, too.
• The total delinquency rate rose to an estimated 5.5 percent, up from 5.1 percent in Q4, and twice the 2.7 percent rate in Q4 2008.
• The 5.4 percent delinquency rate is still well below the 8 percent delinquency rate in Q3 1991, but it is worrisome in light of weak fundamentals, constrained credit availability and a high volume of commercial mortgages due the next several years.
Commercial & industrial loans
• The total delinquency rate rose to an estimated 4.5 percent, up from 4.4 percent in Q4. Despite the estimated increase, delinquency rates for some larger lenders have decreased slightly, possibly indicating that C&I delinquencies are peaking.
• The lack of credit is most apparent in the C&I loan category. Loans outstanding declined by 18 percent during 2009, compared to a 4 percent increase during 2008. Although it is too early to declare a turnaround, very recent data indicates that credit may be expanding. An improvement in business lending is a major component of our expectation for more rapid economic growth in the second half of 2010.
Stress Test redux: The banks are still in trouble
Out of a total of 15,730 banks and credit unions in the U.S., there are 7,349, or 46.7 percent, that are short on capital and need to maintain a high level of liquid funds to keep themselves in business.
Unfortunately, these institutions are the home of over 60 percent of America’s small businesses, the ones which create jobs, according to economist Michael Moebs of Moebs Services, an independent economic research firm in Lake Bluff, which recently updated its Treasury Stress Test (Treasury) of 2009.
“If small businesses and consumers want to find out why the economy is not recovering, they just have to look at the number of community banks and credit unions that need capital,” said Moebs.
Using the Treasury Stress Test his firm conducted last year, Moebs Services recently updated the stress test criteria for all banks and credit unions and found the following:
• Wall St. Banks in 2009 shrank their assets, reduced debt and sold stock to get capital.
• These ‘Too Big to Fail’ (TBTF) banks showed more income but reduced their lending by $393 Billion.
• Community Banks and Credit Unions increased assets by taking on more deposits and saw capital fall.
With a shortage of capital, community banks and credit unions could not make loans to their small business clients.
“Community Banks and credit unions service 20 million of the 27 million small businesses, and no loans to small businesses means no job creation,” said Moebs.
The balance sheet of all depositories shows assets shrunk 4.7 percent, as did loans by 7.8 percent. The impact of the TBTF banks distorts this picture. Attempts by community banks and credit unions to make loans were restricted by lack of capital, which can grow only by net income. Both types of institutions lost money in 2009.
Additionally, bad real estate and repossessed loans grew by 50.4 percent, or $14.4 billion, primarily in the Main St. institutions. The TBTF institutions also paid off much of their debt, reducing leverage and shrinking assets.
The Treasury Stress Test was conducted for only 19 of the largest banks in 2008, which were short about $120 billion in capital.
”If the same values used by Treasury were used on all banks and credit unions in 2008, Treasury would have identified 2,272 institutions needing $189 Billion,” said Moebs.
Now a year later, using the known loan delinquency factors, all the loans including commercial real estate were adjusted and mortgage backed securities were valued at 75 percent, as well as using 4 percent for capital for the big banks and 8 percent for everyone else.
“Our analysis shows that 7,349 depositories need $254 billion in additional capital,” Moebs said. “The actual balance sheet data and the stress test criteria point out, banks and credit unions are still in bad shape.”
Written By: rnybeck
Date Posted: 5/18/2010
Number of Views: 2560