With banks still dropping like maple leaves in late October, I thought it might be interesting to take a look at the state of a few smaller institutions and how they are handling their troubles. This is just three current examples. Unfortunately, U.S. banking regulators predict the number of banks that will fail in 2010 to exceed the number of failures in 2009. On the positive side, it appears some banks are figuring out ways to resuscitate interest from investors and creditors to solve their possible insolvency.
Headquartered in Spokane, Washington, Sterling has received numerous warnings from federal regulators and is now in active negotiations with private equity investors, creditors and regulators over how to best recapitalize. Part of the plan incorporates the conversion of preferred stock to common stock. Addtionally, Sterling reports receiving several non-binding proposals from private equity firms ans has entered into a non-binding Letter of Intent (LOI) with one firm to provide addtional capital to Sterling. They have also secured the support of the U.S Department of the Treasury for their stock conversion plan.
The good news: hey, at least equity investors are talking to Sterling (unlike some of the banks I’ll mention later) and the U.S Treasury is on board with their plan. This should bring the overall health of Sterling up enough for them to be under consideration for release from the hospital, so to speak.
The bad news: After releasing this latest information, Fitch downgraded Sterling Financial’s long-term issuer default rating to ‘C’ from ‘CCC’ and Sterling Savings Bank’s long-term and short-term IDRS to ‘C’. Talk about endless hurdles in a race.
2. Park Avenue Bank in New York
Located in our favorite city for financial misgivings, this New York City bank was closed and put into receivership with the FDIC. The FDIC has subsequently entered into a purchase and assumption agreement with Valley National Bank of Wayne, New Jersey to assume all deposits. The real story on this institution’s demise is around the former President – Charles J. Antonucci, Sr. who was appointed President with the acquisition of Park Avenue bank by real estate entrepreneur David Lichtenstein of Lightstone Group. Antonucci has been arrested and charged with self-dealing, bank bribery, embezzlement of bank funds and fraud with other charges under consideration.
The U.S. Attorney for the Southern District of New York charged Antonucci with allegedly attempting to fraudulently obtain over $11 million worth of taxpayer rescue funds from TARP. This makes Mr. Antonucci the first defendant ever charged with attempting to defraud TARP – way to go! He is also alleged to have used his bank in a scheme that involved swindling two pastors of a Florida congregation out of more than $100,000 that was to be used for a new church. I’m pretty sure he just secured his ride to an equally warm destination in the after life.
The good news: He was caught and, luckily, Valley National Bank agreed to assume assets totaling $520 million with $494 million in deposits.
The bad news: After using what is called a loss-share transaction with the FDIC, Valley National now has the dubious task of dealing with Park Avenue Bank’s troubled assets. $23.8 million in 90-day or more delinquent commercial real estate loans and $1.8 million in foreclosed nonresidential properties. Also, it looks like a co-conspirator may get off with a slap for turning on Antonucci.
3. Advanta Bank
This Draper, Utah headquartered bank has closed its doors forever. The bank was closed yesterday by the Utah Department of Financial Institutions after the FDIC was appointed receiver and unable to find another financial institution to take over the operations. The FDIC approved the payout of insured deposits with the bank and then pretty much said goodbye.
At the end of 2009, Advanta had roughly $1.6 billion in total assets and $1.5 billion in total deposits. It was one of the nation’s largest issuers of business MasterCard’s.
The good news: Those depositers smart enough to know the coverage limits should be okay.
The bad news: Jobs have been lossed, money has likely disappeared and there really is nothing left.
Since the start of the financial crisis, 195 banks, nearly all community banks, have failed. Projected failures for this year are expected to exceed the 145 that closed in 2009. Remember that wave I mentioned in a post last Fall?
source: CoStar (Mark Heschmeyer)
