Mortgages: big banks; little banks

10-23-10
Global Research
Nation's Biggest Banks Each Hold over $20B in Foreclosures: Report 
Global Research, October 23, 2010
DSNews.com 
http://www.globalresearch.ca/index.php?context=va&aid=21586
New data released this week shows that the nation’s largest banks are holding monstrous volumes of soured home loans. Not only has the housing crisis left major lenders knee-deep in an ocean of non-performers, but added exposure to early delinquencies means they could sink even deeper.
According to an analysis by Weiss Ratings, an independent ratings agency covering the financial sector, JPMorgan Chase, Bank of America, and Wells Fargo each reported more than $20 billion in single-family mortgages currently foreclosed or in the process of foreclosure as of midyear.
In addition, Weiss found that for each dollar these banks held of mortgages in foreclosure, there were an additional $2 in loans in the pipeline that were 30 days or more past due.
Among all U.S. banks, JPMorgan Chase has the largest volume of mortgages in foreclosure or foreclosed with $21.7 billion. On top of that, the company has $43.4 billion more in mortgages past due.
Compared to JPMorgan, Bank of America has a somewhat smaller volume of foreclosures — $20.3 billion — but it has a larger pipeline of past-due mortgages at $54.6 billion.
Wells Fargo’s foreclosures come to $20.5 billion, with $48 billion in overdue home loans. According to Weiss, including all foreclosed and delinquent categories, Bank of America has the largest volume of bad mortgages among U.S. banks, with $74.9 billion, while Wells Fargo has the second largest with $68.6 billion.
Other banks, despite their large size, are less heavily exposed to mortgage difficulties. Citibank has $6.3 billion in foreclosures and $19.2 billion in past-due mortgages, or a total of $25.6 billion.
The volume of foreclosures and delinquencies held by other large banks, such as U.S. Bank ($9.5 billion), PNC Bank ($8.9 billion), and SunTrust ($7.3 billion) is even smaller.
Martin D. Weiss, chairman of Weiss Ratings, said, “In addition to the volume of bad mortgages, the vulnerability of each bank to the foreclosure crisis depends on the capital and loan loss reserves it has set aside to cover losses and other factors such as its earnings, liquidity, reliance on less-stable deposits, and the quality of its overall loan portfolio.”
Among banks with $1 billion or more of mortgages already foreclosed or in process of foreclosure, Weiss found that Wells Fargo has the greatest exposure to bad mortgages in proportion to its capital. For each dollar of Tier 1 Capital, the bank has 75.4 cents in bad mortgages, or a ratio of 75.4 percent.
The equivalent ratios for JPMorgan Chase, Bank of America, and SunTrust are 66.8 percent, 66 percent, and 57.6 percent, respectively.
Weiss explained that losses on foreclosures and past-due loans will first be absorbed by the banks’ loan loss reserves, but then they may have to dip into capital.
“Considering that many large banks also take other kinds of risks beyond strictly home mortgages,” Weiss said, “these are very large exposures that could directly impact shareholders and even the safety of depositors.”
Reflecting both their exposure to foreclosures and the other economic factors, the JPMorgan, BofA, and Wells all merit a rating of D (“weak”) or lower from Weiss Ratings, indicating vulnerability to financial difficulties and instability if conditions continue to deteriorate.
10-21-10
Small Banks in the US are Collapsing
Regulators close 7 more banks, a total of 139 US banks closed down in 2010
http://www.globalresearch.ca/index.php?context=va&aid=21600
WASHINGTON (Reuters) - The Federal Deposit Insurance Corp said on Friday that U.S. regulators closed seven more banks, bringing the total so far this year to 139.
The biggest was Hillcrest Bank of Overland Park, Kansas, which had approximately $1.65 billion in total assets and $1.54 billion in total deposits.
Regulators also closed First Arizona Savings, Scottsdale, Arizona; First Suburban National Bank, Maywood, Illinois; First National Bank of Barnesville, Barnesville, Georgia; Gordon Bank, Gordon, Georgia; Progress Bank of Florida, Tampa, Florida; and First Bank of Jacksonville, Jacksonville, Florida.
A newly chartered bank subsidiary of NBH Holdings Corp, Boston, Massachusetts, will assume all of the deposits of Hillcrest Bank.
The new NBH subsidiary, also called Hillcrest Bank, also agreed to purchase essentially all of the failed bank's assets, the FDIC said.
First Arizona Savings had approximately $272.2 million in total assets and $198.8 million in total deposits.
At the time of closing, the bank had an estimated $1.8 million in uninsured funds.
The FDIC said it was unable to find another financial institution to take over the banking operations of First Arizona Savings. As a result, checks to depositors for their insured funds will be mailed on Monday.
First Suburban National Bank had about $148.7 million in total assets and $140.0 million in total deposits.
Seaway Bank and Trust Company, Chicago, Illinois, assumed all of First Suburban's deposits and agreed to purchase essentially all of the failed bank's assets.
First National Bank of Barnesville had approximately $131.4 million in total assets and $127.1 million in total deposits.
United Bank of Zebulon, Georgia, assumed all of the Barnesville bank's deposits and agreed to purchase essentially all of the assets.
Gordon Bank had approximately $29.4 million in total assets and $26.7 million in total deposits.
Morris Bank of Dublin, Georgia, paid a premium of 0.5 percent for the deposits of Gordon Bank and agreed to purchase about $11.5 million of the failed bank's assets. The FDIC will keep the remaining assets for later disposition.
Progress Bank of Florida had approximately $110.7 million in total assets and $101.3 million in total deposits.
Bay Cities Bank of Tampa, Florida, assumed all of Progress Bank's deposits and agreed to purchase essentially all of the failed bank's assets.
First Bank of Jacksonville had approximately $81.0 million in total assets and $77.3 million in total deposits.
Ameris Bank of Moultrie, Georgia, assumed all of the Jacksonville bank's deposits and agreed to purchase essentially all of the failed bank's assets.
FDIC Chairman Sheila Bair has said she expects the number of bank failures this year to exceed the 2009 total of 140, but that total assets of the failures will probably be lower.
This week, the FDIC said estimated bank failures will cost the Deposit Insurance Fund $52 billion from 2010 through 2014, down from an earlier estimate of $60 billion.
The Deposit Insurance Fund, financed by banks that pay into the fund, guarantees individual accounts up to $250,000.
While failures are still occurring at a fairly brisk pace, it is now mostly smaller institutions, community banks, that have been collapsing.
Washington Mutual, which had $307 billion in assets when it was seized in September 2008, remains the largest bank to fail during the financial crisis.
(Reporting by Doug Palmer; editing by Carol Bishopric, Gary Hill)