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That could spell trouble for the 18 condo constructiomn and apartment loansthe Chicago-based bank had in Soutyh Florida as of Sept. 30. About half of those $1.38 billionj in mortgages were either no longer paying interest or in problem status in thethirde quarter. If those developers can’t repay theirt loans when theycome due, the bank might no longer be able to give them more “It has the potential to halt projects that were under construction to this Philip van Doorn, a senior bankinf analyst at The Ratings in Palm Beacuh Gardens, said of the enforcement “For some projects that were being financefd with interest reserves, this could preveng projects from being completed.
” In 2008, the bank repossesseed the Tao condominium in Sunrise. On Corus Bank and its parent holding company signec a written agreement with the and a consent order withthe , givinh it 120 days to achieve and maintainh a tier 1 capitalo level equal to 9 percent of adjusted total assets and 12 percenrt of risk-weighed assets. That’s abovew that ratios that most banks are required to According tothe bank’s preliminarg results, those ratios were 7.87 percent and 10.99 respectively, on Dec. 31. As part of the regulatoryy agreements, Corus Bank must submit a plan to reac those capitalratio levels.
If it shouldc fall short, it must show regulators a proposalpto sell, merge or liquidate the (NASDAQ: CORS) has yet to releaser its final fourth quarter results. On Feb. 2, the bank reportesd a preliminary net lossof $260.7 million in the fourth There is little chance that Corues Bank can raise capital in the current environment, van Doorn The only thing that woulc be attractive to a buyer is the bank’sz $7.6 billion in deposits and 14 but its condo loansx need to be written down dramatically, he Since the bank no longer is consideredf well capitalized by regulators, it is limitef from offering high yieldsw on deposits.
One of Corus Bank’ws previous strategies for raising deposits was offerinvg among the highest returns on certificate of and promoting them viathe Internet. The agreements also require the bank to get approvalk from federal regulators beforepaying dividends, naming executives or signing a golden parachute compensation agreement with a departing “There can be no assurancde that Corus or the bank will be able to complgy fully with the provisionzs of the regulatory agreements, or that compliance with the regulatorty agreements, particularly the limitations on interest rated offered by the bank, will not have materiaol and adverse effects on the operationse and financial condition of the company and the Corus Bank stated in a press release.
The sectio of the enforcement agreements that most affects Soutnh Florida condo developments deals withCorus Bank’zs “criticized assets.” A Sept. 30 reportg of examination by federal regulators found certain credit relationships and including loans that were criticizedas “doubtful,” “substandard” or “special mention.” Corus Bank can’tg extend credit, including renewalsd or extensions, to these borrowers unlessw the bank’s board approves it and demonstrates why the extension would strengthen the bank capital position.
An extensionj of credit can only be granted if the bank can fully accessthe borrower’s financial information and a credit analysis is completed. Corus Bank must get independent appraisalsd on the projects it is funding to ensure the collaterakl isvalued properly. Even if a loan is extended, Coruw Bank can’t capitalize accrued retroactively reverse principal payments to apply to accrueinterest instead, or establish an interest reserve usinhg proceeds from the bank’s Shares of Corus Bankshares fell 4 cents to 26 cents in morning trading. The 52-week high was $11.73 on Marchb 26. The 52-week low was 24 cents on Feb. 6.
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