Also This Week, News of Community Bancorp, Appalachian Bancshares, Preferred Bank, and Union Center NB
Corus Bankshares Inc. in Chicago announced that its audited financial statements for the year ended 2008 contained a 'going concern' qualification from its independent registered accounting firm Ernst & Young LLP.
Corus, with a portfolio consisting primarily of condominium construction loans, many in the hard hit areas of Arizona, Nevada, south Florida and Southern California, has seen a rapid and precipitous decline in the value of the collateral securing its loan portfolio. Thus, it is experiencing significant loan quality issues.
The net loss of $456.5 million it recorded in 2008 was primarily the result of significant increases in the provision for credit losses.
The company said its board of directors has formed a strategic planning committee to seek all strategic alternatives, including a capital investment, a sale, a strategic merger or some form of restructuring.
The company also reported that there are additional concerns that regulators may take other actions, including placing the bank into conservatorship or receivership.
Community Bancorp Feeling Heat of Declining Desert Area Real Estate
Community Bancorp, the Las Vegas-based holding company for Community Bank of Nevada and Community Bank of Arizona, is late filing its annual report for 2008 with the U.S. Securities & Exchange Commission.
The bank holding company has not concluded a goodwill impairment study, nor figured out the appropriate level for its allowance for loan losses.
Community Bancorp said it expects that it will report a loss for the year compared to net income of $20.4 million for a year earlier.
As a result of these losses, the company expects that federal and state regulators will require a formal agreement with respect to, among other things, asset quality, capital and earnings.
In order to bolster the capital ratios at its Nevada bank, the company has filed applications with bank regulatory agencies to merge its Arizona subsidiary into Community Bank of Nevada, thereby acquiring excess capital at the Arizona subsidiary and reducing expenses.
In addition, it has begun to defer interest payments, explore the possibility of selling performing loans and reduce its reliance on brokered deposits.
"As we witnessed in the news throughout the country, real estate values have declined and Nevada and Arizona real estate experienced their share of substantial declines in values during the fourth quarter of 2008 and continue to have downward pressure this year," said Edward M. Jamison, chairman, president and CEO of Community Bancorp. "With the decline in the economic indicators in Nevada and Arizona and our own experience with stressed businesses and loans, we have and continue to assess the underlying collateral values supporting our loan portfolio and, when appropriate, either set aside reserves or write off these reductions in values. This resulted in higher reserves and higher loan amounts being written-off during 2008."
"Banks with real estate concentration have been impacted by these declining values and loan performance issues," Jamison said. "Nevada, with the gaming and hospitality industry, construction, and small businesses, is feeling the impact of the times. Arizona likewise has had declines in property values, heightened vacancies in commercial offices and the retail real estate sector and increasing unemployment numbers."
As of year-end 2008, the bank holding company controlled $82.4 million in foreclosed real estate, of which $21.1 was commercial income producing properties. In addition, it showed $8.9 million in nonperforming multifamily loans.
Appalachian Bancshares Revises Year-End Results; Now Showing a Loss
Appalachian Bancshares Inc. the Ellijay, GA-based holding company for Appalachian Community Bank, Appalachian Community Bank FSB, and Appalachian Real Estate Holdings Inc., revised its financial results for its year ended 2008. As a result of continuing analysis of specific impaired loans, the bank increased its loan loss provision by $2 million.
So now instead of showing net income of $1.1 million for the fourth quarter 2008, it is now showing a net loss $2.1 million. This action brings the bank holding company's allowance for loan losses to 1.64% of total loans versus 1.41% of total loans.
In addition, Appalachian Bancshares' non-performing loans increased to $28.2 million from $24.5 million. The bank holding company now controls $7.5 million of foreclosed commercial income-producing real estate; $3.3 million of nonperforming loans and another $22.6 million in delinquent commercial real estate loans.
The company offers community banking services in Ellijay, East Ellijay, Blue Ridge, Blairsville, Chatsworth, Dawsonville, McCaysville, Dahlonega and Dalton in Georgia, and in Ducktown, TN, and Murphy, NC.
Preferred Bank Hit By Declining San Diego Property Values
Preferred Bank, an independent Los Angeles-based commercial bank focusing on the Chinese-American and diversified Southern California market, reported an additional revision to results for the quarter and year ended Dec. 31, 2008, due to the receipt of an appraisal on an impaired construction loan.
The bank boosted its loan loss allowance by $4.1 million. So now instead of showing net loss of $3.2 million for the fourth quarter 2008, it is now showing a net loss $5 million. The latest revision to its allowance for loan losses is now at 2.19%, from the earlier reported ratio of 1.94%.
Preferred Bank received an appraisal report in March on a townhouse-style condominium project in downtown San Diego that is 99.5% complete showing an as-is value of $6.76 million. Prior to the appraisal, it had allocated $584,000 in specific allowances based on an appraisal from November 2007 showing a discounted value of $7.91 million.
The March "appraisal indicates a value deterioration far beyond our estimation for that area and far in excess of published market statistics for that market area," said Li Yu, chairman and president of Preferred Bank.
Union Center National Bank Takes Back Warehouse Project
Union Center National Bank in Union, NJ, announced that for the first quarter of 2009, it intends to establish a loan loss provision of $1.4 million, which covers a charge-off of approximately $900,000 in connection with a $4.9 million commercial real estate construction project of industrial warehouses. It had recently downgraded the loan to non-accrual status and increased its level for loan loss allowance by $521,000.
"At March 31, 2009, the corporation expects non-performing assets to amount to $9.1 million -- up from $4.7 million at Dec. 31, 2008," said Anthony Weagley, president and CEO of the bank's holding company, Center Bancorp Inc.
The bank's other real estate owned will increase to $4.4 million, with the other asset being a residential condominium project that was taken back in the fourth quarter of 2008. The bank holding company is near completion of that project and has elected to begin to rent the units.
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