Two More Bank Closings

The FDIC closed two more banks on Friday. Heritage Community Bank, in Glenwood Illinois was closed at a cost to the FDIC fund estimated at $42.6 million dollars which is 18 cents for each dollar on deposit. The four branches of Heritage Community will reopen Monday as MB Financial Bank.

I added Heritage Community Bank as number 51 to my list last week as it became apparent that the proposed sale to First Community of Joliet wasn't likely to be completed.

The FDIC also closed Security Savings Bank in Henderson, Nevada. The two branches will reopen Monday as part of Bank of Nevada. The cost to FDIC is estimated at $59.1 million dollars which is 25 cents for each dollar on deposit.

Despite a quickening pace of closures, the FDIC list of troubled banks has grown 47% in the last quarter from 171 to 252. The details of the list are not released, but researchers at Foresight Analytics have a similar list with 275 banks. Foresight has 49 Georgia banks on the list, 35 banks in Florida, 32 in Illinois and 14 in California. As a result, I am adding 4 more banks to my list of banks most likely to close in 2009. Two banks are from Illinois, one is from Georgia and one from Minnesota.

Debuting at 53 on the list is Community Bank of Lemont. Despite raising $3 million in capital in September, the bank ended 2008 with a Texas ratio of 429%.

I've also cleaned up the list after I noticed that I had listed First Piedmont Bank twice.

Here's my current list of the 50 56 Banks Most Likely to Close in 2009.

1 Magnet Bank, Salt Lake City, UT
2 Citizens Community Bank, Ridgewood, NJ
3 FirstBank Financial Services, McDonough, GA
4 Westsound Bank, Bremerton, WA
5 Suburban Federal Savings Bank, Crofton, MD
6 America West Bank, Layton, UT
7 The Community Bank, Loganville, GA
8 Silver Falls Bank, Silverton, OR
9 Ocala National Bank, Ocala, FL
10 Sun Security Bank, Ellington, MO
11 Eastern Savings Bank, FSB, Hunt Valley, MD
12 Alliance Bank, Culver City, CA
13 FirstCity Bank, Stockbridge, GA
14 Chestatee State Bank, Dawsonville, GA
15 First Security National Bank, Norcross, GA
16 Ocean Bank, Miami, FL
17 First Georgia Community Bank, Jackson, GA
18 Family Bank and Trust Co., Palos Hills, IL
19 Southern Community Bank, Fayetteville, GA
20 BankCherokee, Saint Paul, MN
21 First Tuskegee Bank, Tuskegee, AL
22 Federal Trust Bank, Sanford, FL
23 Pinnacle Bank, Beaverton, OR
24 Lake Country Community Bank, Morristown, MN
25 Mesa Bank, Mesa, AZ
26 Bank of Wyoming, Thermopolis, WY
27 1st American State Bank of Minnesota, Hancock, MN
28 First State Bank of Altus, Altus, OK
29 EvaBank, Eva, AL
30 Strategic Capital Bank, Champaign, IL
31 Ebank, Atlanta, GA
32 Polk County Bank, Johnston, IA
33 Parkway Bank, Rogers, AR
34 Security Bank of Gwinnett County, Suwanee, GA
35 State Bank of Park Rapids, Park Rapids, MN
36 Herrin Security Bank, Herrin, IL
37 Omni National Bank, Atlanta, GA
38 Northpointe Bank, Grand Rapids, MI
39 Towne Bank of Arizona, Mesa, AZ
40 Haven Trust Bank, Duluth, GA
41 Timberland Bank, El Dorado, AR
42 Blue Ridge Savings Bank, Inc., Asheville, NC
43 First Piedmont Bank, Winder, GA
44 Select Bank, Grand Rapids, MI
45 Oxford Bank, Oxford, MI
46 Security Bank of North Metro, Woodstock, GA
47 MetroPacific Bank, Irvine, CA
48 Earthstar Bank, Southampton, PA
49 Neighborhood Community Bank, Newnan, GA
50 The Home Savings and Loan Company, Youngstown, OH
51 Heritage Community Bank, Glenwood, IL
52 Vineyard Bank, NA, Rancho Cucamonga, CA
53 Community Bank of Lemont, Lemont, IL
54 Mainstreet Bank, Forest Lake, MN
55 Mutual Bank, Harvey, IL
56 Freedom Bank of Georgia, Commerce, GA

New Home Sales Plummet

A number of statistics came out this week on housing and they are all bad. Existing home sales are down. Existing home prices are down. New home sales are down. New home prices are down. No area of the country and no segment of the market seems to be running counter to the heavy downward trend.

The Census Department reported today that sales of new single family homes in January were down another 10% from December and down 48% from January of last year. The seasonally adjusted annual rate was just 309,000. That's less than half of the 776,000 average rate for 2007 and down about 70% from the 10-year average (1998-2008) of 992,000 million new single family homes per year.

Let's break it down by price range. In the following chart, you can see that new home sales at all price levels below $400,000 are down.

But the luxury end of the market is especially down. Many home buyers looking at homes priced at over $400,000 need "Jumbo" mortgages. The next chart illustrates how far the top end of the market has fallen.

Many homes over $400,000 are considered "custom homes" and are built by small, independent builders who normally enjoy a comfortable profit margin. These small builders are getting hammered in this market. The profit margin is gone. Many new homes are being sold at a loss, if they can sell at all. Few people are shopping for new homes. It doesn't pay to staff a sales office. Most showings are by appointment only. If builders can find an interested purchaser, cancellations are high because move-up buyers can't sell their old homes. As fast as builders have tried to cut inventory, sales have dropped even faster. The average new home for sale has now been sitting empty for more than a year.

America's Emptiest, Most Abandoned Cities

According to Forbes magazine, Las Vegas edged Detroit for the title of America's most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and Dayton, Ohio.

Forbes rankings rankings of most abandoned cities uses a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country. They are based on Q4 2008 data released Feb. 3 by the Census Bureau. Each city was ranked on rental vacancies and housing vacancies. Forbes' final ranking is an average of the two.

Story Excerpts:

• In 2007, Israeli billionaire Yitzhak Tshuva and partner Nochi Dankner paid $1.25 billion to buy a 34.5-acre site on the Strip, with plans to build an $8 billion mega-casino modeled after New York's Plaza Hotel. By November, the value of the lot had plummeted to $650 million--half what they paid for it. Groundbreaking on the casino has been pushed back to 2010, and today, the land may be worth less than the $625 million Tshuva and Dankner borrowed to buy it.
  

• Detroit's problems run much deeper. Though its vacancy rates are marginally better than Sin City's, Motown has been on the empty side for decades. An industrial boomtown during the first half of the 20th century, Detroit's population swelled from 285,000 in 1900 to 990,000 in 1920, reaching a peak of 1.8 million in 1950.
  
  
• But starting in the 1960s, Detroit began a precipitous decline. Detroit's population is now 900,000--half what it was in the middle of the century--and many of its neighborhoods languish in varying states of decay. Most scholars blame rapid suburbanization, outsourcing of manufacturing jobs, and federal programs they say exacerbated the situation by creating a culture of joblessness and dependency.

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Silver Falls Bank Closed

Yesterday the FDIC and the Oregon Department of Consumer and Business Services closed Silver Falls Bank located in Silverton, Oregon. The bank's three branches will reopen Monday as new branches of Citizens Bank of Corvallis, Oregon. Silver Falls Bank was number 8 on my list of the 50 Banks Most Likely to Close in 2009. It marks the 14th bank closed this year.

Correction: I shouldn't have added First Piedmont Bank of Winder, Georgia as number 52 to my list because I already had it listed as number 43.

Banking Conditions Deteriorate

Although this has been a workweek shortened by the President's Day federal holiday, more bank shutdowns by the FDIC are expected after the close of business today. At the beginning of the year, I posted a list of what I felt were the 50 banks most likely to fail in 2009. Thirteen banks have already failed in 2009 and 6 of those were on my list. New data is now available which shows considerable deterioration in the condition of our nation's banks and I would like to add three banks in particular to my list before the FDIC announces this week's closings.

The first addition I'd like to make, debuting at 51 on my list is Heritage Community Bank of Glenwood, Illinois. Heritage Community would have made my first list except that I thought that it had already changed hands. First Community Financial Partners, the holding company of First Community Bank of Joliet, announced on October 30, 2009 a letter of intent to acquire a major interest in Heritage Community Bank. That deal was expected to close by the end of 2008. It hasn't.

Meanwhile, Heritage Community's Texas ratio (a measure of loans more than 90 days delinquent over combined equity and reserves for loan losses) has exploded from 143.3% on September 30, 2008 to 514.2% by the end of the year. CEO John Saphir, who had hoped to retire by the end of 2008, tells Crain's Chicago Business, "We're in discussions with an equity investor group to increase the bank's capital and support its loan portfolio." With what may be the highest Texas ratio in the country, I don't expect those discussions to go far.

The second addition I'm making to the list is First Piedmont Bank of Windner, Georgia. Georgia has the nation's largest number of troubled banks, a fact that was trumpeted last Sunday on the cover of the Atlanta Journal-Constitution. The AJC listed 42 Georgia banks with Texas ratios over 100%. First on their list was FirstBank Financial Services which has already been closed. Second on their list is Omni National Bank, which is number 37 on my list. Third on their list is First Piedmont which I am bringing in at number 52. First Piedmont's Texas ratio rose from 189% to 373% during the final 3 months of 2008. Georgia banks were already running precariously, the cover story on the Sunday paper certainly didn't help things.

Georgia, Florida and Illinois have the largest number of troubled banks. I expect to be adding more banks from these three states to my list in the coming weeks. Unfortunately, I don't have any new data on Florida banks yet.

The third bank I'm adding to my list is Vineyard Bank of Rancho Cucamonga, California. The Califonia Department of Financial Institutions has been more aggressive than other states in shutting down troubled banks, so although Vineyard is not as bad off as banks in many other states, it's near the top of the list for banks in California. The FDIC is also getting its west coast office in Irvine, CA up to full speed, expecting to shut down more banks in that part of the country. While Vineyard is the only California bank I am adding this morning, Downey is not far behind.

So as we go into another FDIC Friday, here is my updated list of 50 53 Banks Most Likely to Close in 2009.

1 Magnet Bank, Salt Lake City, UT
2 Citizens Community Bank, Ridgewood, NJ
3 FirstBank Financial Services, McDonough, GA
4 Westsound Bank, Bremerton, WA
5 Suburban Federal Savings Bank, Crofton, MD
6 America West Bank, Layton, UT
7 The Community Bank, Loganville, GA
8 Silver Falls Bank, Silverton, OR
9 Ocala National Bank, Ocala, FL
10 Sun Security Bank, Ellington, MO
11 Eastern Savings Bank, FSB, Hunt Valley, MD
12 Alliance Bank, Culver City, CA
13 FirstCity Bank, Stockbridge, GA
14 Chestatee State Bank, Dawsonville, GA
15 First Security National Bank, Norcross, GA
16 Ocean Bank, Miami, FL
17 First Georgia Community Bank, Jackson, GA
18 Family Bank and Trust Co., Palos Hills, IL
19 Southern Community Bank, Fayetteville, GA
20 BankCherokee, Saint Paul, MN
21 First Tuskegee Bank, Tuskegee, AL
22 Federal Trust Bank, Sanford, FL
23 Pinnacle Bank, Beaverton, OR
24 Lake Country Community Bank, Morristown, MN
25 Mesa Bank, Mesa, AZ
26 Bank of Wyoming, Thermopolis, WY
27 1st American State Bank of Minnesota, Hancock, MN
28 First State Bank of Altus, Altus, OK
29 EvaBank, Eva, AL
30 Strategic Capital Bank, Champaign, IL
31 Ebank, Atlanta, GA
32 Polk County Bank, Johnston, IA
33 Parkway Bank, Rogers, AR
34 Security Bank of Gwinnett County, Suwanee, GA
35 State Bank of Park Rapids, Park Rapids, MN
36 Herrin Security Bank, Herrin, IL
37 Omni National Bank, Atlanta, GA
38 Northpointe Bank, Grand Rapids, MI
39 Towne Bank of Arizona, Mesa, AZ
40 Haven Trust Bank, Duluth, GA
41 Timberland Bank, El Dorado, AR
42 Blue Ridge Savings Bank, Inc., Asheville, NC
43 First Piedmont Bank, Winder, GA
44 Select Bank, Grand Rapids, MI
45 Oxford Bank, Oxford, MI
46 Security Bank of North Metro, Woodstock, GA
47 MetroPacific Bank, Irvine, CA
48 Earthstar Bank, Southampton, PA
49 Neighborhood Community Bank, Newnan, GA
50 The Home Savings and Loan Company, Youngstown, OH
51 Heritage Community Bank, Glenwood, IL
52 First Piedmont Bank, Windner, GA
53 Vineyard Bank, NA, Rancho Cucamonga, CA

Pasquinelli Homes Stops Building

New home starts in January dropped by 16.8% from December and were down 56% below year-ago levels. Total housing starts sank to a 466,000 seasonally adjusted annual rate and single family home starts dropped to a 347,000 annual rate. This is down 79% from the peak rate three years ago. Read the full report

The sustainable annual rate for new single family home starts is around 1,000,000 homes per year. We got above that during the bubble and are paying for it now with foreclosures and empty inventory. I would not be surprised to see single family home starts drop to 250,000 for a 4-month average and 218,000 for a minimum. Home builder expectations are still near an all time low.

In the Midwest, new home starts are down 29% from December and 66% below one year ago. One Chicago-based builder, Pasquinelli Homes, confirmed Monday that they have halted all construction. Pasquinelli ranked as the nation's 24th largest builder in 2007. In addition to Chicago, they also have developments in Indiana, Ohio, Pennsylvania, West Virginia, the Carolinas, Georgia and Texas. Pasquinelli also does business under the name Patriot Homes. Bigbuilderonline

California Home Prices Continue Slide

California home prices continue to slide. Eight chiefs of the nation's top banks appeared before Congress yesterday and agreed to hold off on home foreclosures for three weeks while the new administration tries to come up with a plan.

Financial Times story

The three week delay doesn't really hurt the banks because they already have more vacant foreclosed homes than they can sell. It scores them political points for agreeing to work with Congress while at the same time delaying the realized losses from showing up on their first quarter financial reports.

Somewhere around 60% of California's home sales are foreclosure related which is depressing prices. The market can only absorb about 15% of sales as foreclosures before prices begin to be affected. Even with the occasional delays like the three additional weeks agreed to by Chase, Bank of America and Wells Fargo, foreclosures will continue to dominate the market during 2009. I expect home prices will continue to slide in California for a while longer.

FDIC Closes 2 More Banks

The FDIC closed two more banks today, bringing to 8 the number of banks closed in 2009. Both banks were on my list of 50 banks most likely to close in 2009. They were number 3 on my list, FirstBank Financial Services of McDonough, GA; and number 12 on my list, Alliance Bank of Culver City, CA.

FirstBank Financial is being taken over by Regions Bank. Alliance Bank is being taken over by California Bank and Trust.

Here's an update of my New Year's list again of 50 banks most likely to close in 2009:

1 Magnet Bank, Salt Lake City, UT
2 Citizens Community Bank, Ridgewood, NJ
3 FirstBank Financial Services, McDonough, GA
4 Westsound Bank, Bremerton, WA
5 Suburban Federal Savings Bank, Crofton, MD
6 America West Bank, Layton, UT
7 The Community Bank, Loganville, GA
8 Silver Falls Bank, Silverton, OR
9 Ocala National Bank, Ocala, FL
10 Sun Security Bank, Ellington, MO
11 Eastern Savings Bank, FSB, Hunt Valley, MD
12 Alliance Bank, Culver City, CA
13 FirstCity Bank, Stockbridge, GA
14 Chestatee State Bank, Dawsonville, GA
15 First Security National Bank, Norcross, GA
16 Ocean Bank, Miami, FL
17 First Georgia Community Bank, Jackson, GA
18 Family Bank and Trust Co., Palos Hills, IL
19 Southern Community Bank, Fayetteville, GA
20 BankCherokee, Saint Paul, MN
21 First Tuskegee Bank, Tuskegee, AL
22 Federal Trust Bank, Sanford, FL
23 Pinnacle Bank, Beaverton, OR
24 Lake Country Community Bank, Morristown, MN
25 Mesa Bank, Mesa, AZ
26 Bank of Wyoming, Thermopolis, WY
27 1st American State Bank of Minnesota, Hancock, MN
28 First State Bank of Altus, Altus, OK
29 EvaBank, Eva, AL
30 Strategic Capital Bank, Champaign, IL
31 Ebank, Atlanta, GA
32 Polk County Bank, Johnston, IA
33 Parkway Bank, Rogers, AR
34 Security Bank of Gwinnett County, Suwanee, GA
35 State Bank of Park Rapids, Park Rapids, MN
36 Herrin Security Bank, Herrin, IL
37 Omni National Bank, Atlanta, GA
38 Northpointe Bank, Grand Rapids, MI
39 Towne Bank of Arizona, Mesa, AZ
40 Haven Trust Bank, Duluth, GA
41 Timberland Bank, El Dorado, AR
42 Blue Ridge Savings Bank, Inc., Asheville, NC
43 First Piedmont Bank, Winder, GA
44 Select Bank, Grand Rapids, MI
45 Oxford Bank, Oxford, MI
46 Security Bank of North Metro, Woodstock, GA
47 MetroPacific Bank, Irvine, CA
48 Earthstar Bank, Southampton, PA
49 Neighborhood Community Bank, Newnan, GA
50 The Home Savings and Loan Company, Youngstown, OH

Mid-Atlantic Home Prices Slide

A January 30th article in the New York Times points out that apartment rents are falling in Manhattan.

This follows a slow steady slide in home prices in the region.

Mid-Atlantic home prices did not get as inflated as Florida and California, but home prices there are falling following the national trend. New York is losing jobs related to the financial services industry. Washington DC employment is steady or rising. Both cities are expected to continue the downward trend in home prices for the next several months.