bank run blog

Just as the some of the nation’s largest and most coddled banks step up to ostentatiously “repay” a tiny fraction of the money that the Treasury and Federal Reserve have funneled to them through a purposely bewildering variety of mechanisms since August 2007, the ratings agencies have discovered similar widespread insolvency at the regional and super regional level. According to Reuters :

“Standard & Poor’s on Wednesday cut its ratings on 18 banks citing expectations of more difficult operating conditions due to volatile financial markets and tighter regulation.

Among the rating changes, S&P cut the counterparty credit ratings of Wells Fargo & Co by one notch to AA-minus, U.S. Bancorp by two notches to A-plus and Fifth Third Bancorp by two notches to BBB.

S&P also downgraded the counterparty credit ratings of Huntington Bancshares and Carolina First Bank by two notches to junk-status BB-plus with a negative outlook. It also cut Citizens Republic Bancorp counterparty credit rating by three notches to BB-minus with a negative outlook.”

The Associated Press reports that S&P analysts predict “permanent repercussions” still to come from the banking crisis that so many believe is over :

“Widescale changes to the industry because of the credit crisis and ongoing recession will dramatically alter the banking landscape, S&P credit analyst Rodrigo Quintanilla said in a release.

‘We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions,’ Quintanilla said. ‘Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality. Such a transition period justifies lower ratings as industry players implement changes.’”

Reuters : S&P cuts credit ratings on 18 US banks

Associated Press : Standard & Poor’s cuts ratings on 18 banks

Bloomberg : U.S. Stocks Fall, Led by Banks on Downgrade; Health Shares Gain

The FDIC has announced the failure of America West Bank, of Layton, Utah. The federal agency has arranged a sale of the failed bank’s assets to Cache Valley Bank of Logan.

America West Bank is the 32nd bank to fail in the nation this year, and the second in Utah. The FDIC closed MagnetBank, Salt Lake City, on January 30. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“America West Bank, Layton, Utah, was closed today by the Utah Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Cache Valley Bank, Logan, Utah, to assume all of the deposits of America West.

The failed bank’s three offices will reopen on Monday as branches of Cache Valley Bank. Depositors of America West Bank will automatically become depositors of the assuming bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches.”

see resources–

FDIC Failed Bank Information Page : Cache Valley Bank, Logan, Utah, Assumes All of the Deposits of America West Bank, Layton, Utah

Salt Lake Tribune : America West Bank shuttered

The FDIC has announced the failure of Silverton Bank, National Association, of Atlanta, Georgia. The federal agency has created a bridge bank to take over the operations of the failed institution.

Silverton Bank is the 30th bank to fail in the nation this year, and the sixth in Georgia. The FDIC closed American Southern Bank, Kennesaw, on April 24. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“Silverton Bank did not take deposits directly from the general public nor did it make loans to consumers. It was a commercial bank that provided correspondent banking services to its client banks.

Silverton Bank had approximately 1,400 client banks in 44 states, and operated six regional offices. It provided a variety of services for its clients, including credit card operations, clearing accounts, investments, consulting, purchasing loans, and selling loan participations. Since the FDIC created a new bank to take over the operations of Silverton Bank, there is not expected to be any meaningful impact on the bank’s clients.

The creation of the bridge bank allows the client banks to maintain their correspondent banking relationship with the least amount of disruption. The FDIC will operate Silverton Bridge Bank, N.A., to allow preexisting marketing efforts for the bank to continue.

At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC’s insurance limits.”

see resources–

FDIC Failed Bank Information Page : FDIC Creates Bridge Bank to Take Over Operations of Silverton Bank, National Association, Atlanta, Georgia

Reuters : U.S. regulators seize Silverton commercial bank

With all the attention on the large banks, their astonishing earnings, and their preordained success in the federal stress tests, it was a good week to take a look at the rest of the US banking industry, particularly the so-called “superregionals”, that have billions in deposits but fewer friends in Washington than the big four (C, BAC, JPM, WFC). According to CNN :

“Even in this chilly economic climate, megabanks like Wells Fargo and Citigroup have somehow managed to make money.

A bit lower on the banking food chain however, there have been few signs of relief for big regional banks.

KeyCorp and Fifth Third Bancorp, two major banks headquartered in Ohio, both reported losses this week, hurt, in part, by their exposure to commercial real estate.

Further to the south, First Horizon National, one of Tennessee’s largest lenders, recorded its fourth-straight loss last week. Atlanta-based SunTrust reported an $875.4 million loss on Thursday.

And in other states that have been hit hard during the recession, such as Oregon, regional banks have found themselves unable to catch a break. Portland-based Umpqua Holdings reported a nearly $14 million loss last week.

Many of these regional banks have been stung by rising loan losses as more and more Americans find themselves out of work or simply unable to make ends meet.”

A Wall Street Journal report from Wednesday also focused on the superregional banks, emphasizing that their financial positions offer a truer barometer of the health of the economy than the dodgy balance sheets of the covertly subsidized big four :

“From Minnesota to Alabama, battered regional banks are warning a turnaround from the economic malaise is nowhere in sight.

A series of large regional banks reported Tuesday that rising losses from bad loans plagued first-quarter results. And, that’s forced names like U.S. Bancorp, Regions Financial Corp., and others to put more money aside to fortify against another wave of defaults.

It demonstrates not just massive U.S. institutions like Bank of America Corp. are reeling as the industry pays for extending credit to shaky borrowers. Smaller players scattered across the country are also feeling the pain, telling investors a protracted recession means things will get worse before they get better.

‘No significant turnaround will occur this year,’ Huntington Bancshares Inc. Chief Executive Stephen Steinour said after the Columbus, Ohio-based bank posted a $2.43 billion quarterly loss. He announced a nearly $300 million credit loss provision as the bank faces a stream of potential losses from commercial loans.

Huntington is just one example of a bank struggling as a troubled economy and tight credit environment make it more difficult for consumer and business borrowers to pay their debt. Falling stock markets and rising unemployment also illustrate the breadth and depth of the economic stress, regional bank CEOs said.

Investors have been paying particular attention to regional banks after BofA and Citigroup Inc. reported better-than-expected results through largely one-time gains and accounting changes. Regionals, which typically focus on bread-and-butter operations like lending and deposits, offer a purer snapshot of the industry.

‘We’re now dealing with an extreme recession, and the continued resolution of the over-indebted consumer,’ said Nancy Bush, an independent bank analyst. ‘This is not a 2009 phenomenon, but something we’ll possibly deal with into 2011 to 2012.’”

Bloomberg reports that the entire sector has become unattractive to investors, who believe that writedowns will continue to mount for the superregionals :

“’Across the board, regional banks just continue to fall short of expectations,’ said Terry McEvoy, an analyst with Oppenheimer & Co. ‘Net charge-offs are coming in higher than expected, and really as we move our way through the credit cycle, commercial lending is really driving those losses.’”

CNN Money : Regional banks can’t catch a break

Wall Street Journal : Regional Banks Show No Turnaround In Sight

Bloomberg : PNC, SunTrust, Fifth Third Boost Bad Debt Provisions

The FDIC has announced the failure of First Bank of Idaho, of Ketchum, Idaho. The federal agency has arranged a sale of the failed bank’s assets to U.S. Bank, National Association (U.S. Bank), of Minneapolis, Minnesota.

First Bank of Idaho is the twenty-ninth bank to fail in the nation this year, and the first in Idaho. The last Idaho bank closed by the FDIC was Northwestern Federal Savings and Loan Association, Boise, on August 26, 1988. There were a total of twenty-five bank failures in the United States in 2008. From the official press release :

“First Bank of Idaho, FSB, Ketchum, Idaho, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with U.S. Bank, Minneapolis, Minnesota, to assume all of the deposits, excluding those from brokers, of First Bank of Idaho.

The failed bank had seven offices in Idaho and Wyoming. All seven offices will reopen on Monday as branches of U.S. Bank. Depositors of First Bank of Idaho will automatically become depositors of U.S. Bank. The two drive-up windows with Saturday hours will reopen tomorrow and operate under normal business hours.”

see resources–

FDIC Failed Bank Information Page : U.S. Bank, Minneapolis, Minnesota, Assumes All of the Deposits of First Bank of Idaho, Fsb, Ketchum, Idaho

Reuters : U.S. regulators close First Bank of Idaho