The last few days have seen a handful of articles in the local press on the subject of the strength (or lack thereof, as it turns out) of local banks. Here’s a brief summary.
First-up is a relatively in-depth look at the status of dozens of banks based in Washington State: Washington’s banks under stress
…several of Washington’s community banks also are clearly straining under the weight of the crisis, a Seattle Times analysis shows.
At least a dozen of the 52 Washington-based banks examined are carrying heavy loads of past-due loans, defaults and foreclosed properties relative to their financial resources. Many of these banks have set aside relatively little cash to cover problem loans, the analysis shows.
And even the relatively healthy banks are under more pressure than they were a year ago.
…
…at most community banks, residential mortgages were a relatively small part of their business. Instead, their troubles are tied directly to their heavy dependence on real-estate loans — mainly loans to local builders and developers.“Many community banks found that (construction and development loans) was an area in which they could compete effectively against the big banks,” Frontier’s Fahey said.
At Frontier Bank, for example, construction and development loans made up 44.5 percent of all assets at year’s end. City Bank had 53.3 percent of its assets in such loans, and at Seattle Bank (until recently Seattle Savings Bank), they constituted a full 54.2 percent of total assets.
Such loans looked safe and generated big profits during the housing boom. But since the housing market began to crater in late 2007, defaults on such loans have soared industrywide.
We know that it will likely take between two and eight years to work through King County’s housing oversupply. In the mean time, small builders—and by extension the local banks that loaned them money—are going to be experiencing some tough times.
Next up, the Olympian brings news of some even more serious news for Lacey-based Venture Bank: Venture Bank faces financial deadline
Federal regulators have ordered Venture Bank to raise more capital or find a buyer by next month because of concerns about its financial health.
In a letter dated Feb. 13 but disclosed on the Federal Deposit Insurance Corporation’s Web site Friday, the FDIC notified the bank that it has 60 days to raise more money, find a buyer or find a merger partner. The 60-day period ends April 14.
Meanwhile, Federal Home Loan Bank of Seattle reported a loss of $241 million in the fourth quarter 2008: Federal Home Loan Bank of Seattle reports losses
And finally, the Seattle Times front page story today focuses in on the impact of the job losses at WaMu’s former downtown headquarters: Layoff aftershocks hit WaMu neighborhood
So is there any good economic news out there for Seattle and Washington State? Well, not really on the banking front, but Amazon is still pretty profitable, and hey, at least we’re not Cleveland, right?
(Drew DeSilver, Seattle Times, 03.29.2009)
(Rolf Boone, The Olympian, 03.29.2009)
(Seattle Times, 03.30.2009)
(Marc Ramirez, Seattle Times, 03.30.2009)
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“Many community banks found that (construction and development loans) was an area in which they could compete effectively against the big banks,” Frontier’s Fahey said.
This is where the big disconnect took place. The bankers were unable to recognize that much of the inventory (developments they funded for builders accounts) being gobbled up was through the subprime and 100% loans they were so adamant about not participating in. We’ve seen the quotes in the papers….’we just didn’t participate in all that toxic loan and Wall Street stuff.’ Yes, but what was buying your developers housing? Those very loans.
I had one conversation with a bank executive from one of the banks named in the Seattle Times piece. I was very specific in my conversation about the bubble we were in and asked about their exposure to commercial/development/builder accounts. This was late Fall 2006. Today the stock is down 90% +. Who coulda known? The escrow guy or the suits?
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At the Town Hall meeting with Venture Bank and hearing the CEO and CFO talk its no wonder they are toast. They remain BULLISH on a quick recovery and when I began to speak it seemed readily apparent they had no answers as to HOW this recovery would take place. I was quickly shut down and hearing over and over how they blame Bernanke/Paulson for all their problems was ridiculous.
Futhermore, after the event I questioned the CFO as to WHY they sustained such losses in FNM/FRE. Did they not see what was happening in Nevada/Az? Why not stop loss orders in their portfolios?
As usual, NO answers just finger pointing. Better find that buyer quick boys!
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BANKS WILL GO “BELLY UP”
Dr Roubini predicts more, in part:
“…Roubini Says Stocks Will Drop as Banks Go ‘Belly Up’
U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.
“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”…”
The rst of the URL:
http://www.rgemonitor.com/roubini-monitor/256190/bloomberg_-_roubini_says_geithner_plan_wont_stop_nationalizations
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RE: Ray Pepper @ 2 –
Ray, it’s because Seattle is special…Venture neglected to hedge their bets, and are now paying for it. Instead of taking personal responsibility, it’s much easier to blame the gov. I’m sure if Bernie or Paulie were somehow present, Venture wouldn’t have said a word.
That being said, I’m all for local banks (and business in general), and it hurts to see them doing so poorly.
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Ray:
The Venture CEO is living in a delusion fueled by denial. This is probably the first time he has ever had to face not having his parents pick up after his mess. After leaving the safety of the parents’ home, many people look to government to take over the parental duties. That’s why he can’t believe Uncle Sam won’t pick up this mess for him. It’s outside of his realm of imagination.
It’s like when you’re first told there is no Santa Clause. It’s hard to accept at first, but with time you get through it.
That’s just my opinion of course.
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RE: Jonness @ 5 -
If I stand aside, will the government clean my teenage daughter’s room?
Will the hazmat team use that cool yellow caution tape? ;-)
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