An interesting 9 bagger for the FDIC

Firday's 9 bank failures represent the largest number of closings in one week during the current banking crisis. However, all 9 banks were owned by FBOP a multi-bank holding company and all were purchased by US Bancorp.

Below is the updated under capitalized bank list with new failures in orange, and prior weeks failures in red.

Note that only 4 of the 9 banks that failed this week were under capitalized. This has to do with the fact that bank holding company (FBOP) was under capitalized. The Federal Deposit Insurance Act contains provisions that all bank subsidiaries of a multibank holding company are financially responsible for the costs of resolving the failure of any of the other subsidiaries.

Credit Philip van Doorn of The Street.com

The FDIC has been busy afterall!

Over the last 2 weeks there was only 1 bank failure. Well below the average over the last several months. Knowing that there are over 482 troubled banks, I for one was wondering what they heck they have been up to. Well now we know... they were preparing for the 7 bank failures today!

Check out the following list of banks that are considered under capitalized by regulatory standards. Capital ratios are a great predictor of bank failure. Failed banks are highlighted in red, with the failure date in the last column.

Data from SNL financial via The Street. Here is another great Troubled Bank List.

Ocean Bank lays off 78

From the South Florida Business Journal:

Ocean Bank notified 78 employees Friday that they had been laid off.

...

The bank’s expenses will be reduced by about $4.3 million a year after the workforce reductions, Macedo said.

I suppose this is a step in the right direction, but it is way too little way too late. Back to the article:

With 19.5 percent of its loans noncurrent on June 30, Ocean Bank is among the most financially troubled South Florida banks. After losing $204.7 million in 2008, the bank lost $89.5 million in the first six months of this year. The bank has been under a cease and desist order from regulators since 2004.

 ...

Its shareholders in Venezuela supported the bank, which has $4.4 billion in assets, with a $40 million capital injection last year. Capital levels exceeded regulatory requirements in the second quarter.

According to Carson Medlin's Q2 2009 Florida Asset Quality Review Ocean Bank had a Texas Ratio of 160.8% due to the extremely high level of NPAs. Making it a high risk for failure. The way the CRE market appears to be headed it will need another capital injection soon to avoid a meeting with the FDIC on Friday.

Update:
A perfect quote from a WSJ article titled Banks With 20% Unpaid Loans at 18-Year High Amid Recovery Doubt via Calculated Risk (both worth a read)

For banks with 20 percent of loans overdue, “either they’ve got a massive amount of capital, or the FDIC just hasn’t gotten around to them,” said Jeff Davis, an analyst with FTN Equity Capital Markets in Nashville.

I wouldn't say that Ocean qualifies as having a massive amount of capital...

The spoils of Subprice & C&D lending

So far in 2009 95 Banks have failed in the US due to various types of Irresponsible lending. You might be wondering why this is a good thing for local economies. Just imagine the value added by enterprising college students (and unemployed mortgage brokers) when they discover the mysterious and shockingly crappy auctioneer websites that are being used by the FDIC to auction off the spoils, buy them from the FDIC for almost nothing, and then flip them on ebay / craigslist!

Is it possible that the FDIC is worse at liquidaton than it is at regulation?!?!

For your browsing pleasure:

http://www.tranzon.com/OnLineAuctions.aspx

https://ricklevin.nextlot.com/public

http://www.worleyauctioneers.com/index.php


Disclaimer: I realize that a few exotic cars and desk chairs are completely insignificant when compared to the Billions in bad (loan) assets, but it is interesting none the less.