Bank Failure Friday Catches Up with Corus
Speculation that Chicago-based Corus Bank would fail dates to at least last February. Yesterday the FDIC and the bank's primary regulator, the Office of the Comptroller of the Currency, finally made it official. Friday's closure of Corus and the FDIC's additional shuttering of two small community banks brings the total number of bank failures for the year to 92. (Here is our list of failed banks.)
Corus' failure will cost the FDIC deposit fund an estimated $1.7 billion. As of last June, the bank had $7 billion in assets and $7 billion in deposits.The FDIC reached an agreement with MB Financial Bank, also of Chicago, to assume all of the deposits of Corus Bank. MB will pay a premium of 0.2 percent for the deposits and will also purchase $3 billion of the bank's assets. The FDIC plans to sell most of the remaining assets in the next 30 days.
In the past decade, Corus transformed itself from a small Midwestern bank into a construction lending powerhouse, focusing on funding condominium building in the nation's once frothiest real estate markets of South Florida, Las Vegas, and California.
Per The New York Times:
Corus will go down as the great enabler of condo madness, and its travails are a harbinger of the pain yet to come in the troubled world of commercial real estate. More than any other condo lender, Corus epitomized the easy lending and lax oversight of the go-go years — and the pain of the ensuing bust. Its share price, which was nearly $13 in February of 2008, has plummeted into the land of penny stocks, closing at 25 cents Wednesday.
More than half of the bank's $3.9 billion in condo-construction loans were in nonaccrual or foreclosure in April, according to the Wall Street Journal.
Last February, the bank signed agreements with regulators pledging to raise more capital or find a buyer within 120 days. That same month, the Treasury Department rejected Corus' application for TARP money. Then in April, Robert Glickman, president and CEO of Corus, resigned from the bank for "personal reasons." His father, Joseph, who had purchased the bank in 1966 and was still the chairman of the board of the bank's holding company, also resigned. The Glickman family then set busily to selling its shares in the bank. When the regulator-imposed deadline passed with the bank failing to meet the requirements of the agreement, it was only a matter of time before federal officials shut down the operation.
The two other banks to fail on Friday were Brickwell Community Bank of Woodbury, Minn., and Venture Bank of Lacy, Wash. The combined failures cost the FDIC deposit fund $320 million. The FDIC entered into agreements with First Citizens Bank & Trust Company of Raleigh, N.C., to assume the deposits of Venture Bank and CorTrust Bank of Mitchell, S.D., to take those of Brickwell.
As big banks return their TARP money, Fannie Mae and Freddie Mac continue to be a drain.