Bair – 106 Banks Down, 400 To Go!

Straight-talking, fast shooting and true to her word, FDIC gunslinger Sheila Bair pulled the trigger on seven more banks over the weekend.  The closings raised her agency’s annual total to 106 banks shuttered in 2009.  In August, the understaffed and under-funded FDIC identified 416 banks with total assets of $299.8 billion that were on the agency’s troubled bank list.  There is little doubt that bank closings will remain aggressive through 2011 and quite possibly well beyond.

The FDIC’s staff was trimmed from 21,000 employees to 6,000 during the Bush presidency.  Meanwhile, the agency’s capital funding is sorely depleted.  Bair is patiently waiting much needed new funding derived from pre-paid member dues and Obama Administration-approved staff increases.  The fund replenishment and increased examiner body count will enable even more aggressive shuttering of troubled lending institutions.

This weekend’s closings included: 

• Flagship National Bank ($175 million) – Bradenton, Florida – assets now managed by First Federal Bank of Florida

• Partners Bank ($64.9 million) – Naples, Florida – assets now managed by Stonegate Bank in Fort Lauderdale

• Hillcrest Bank Florida ($84 million) – assets managed by Stonegate Bank in Fort Lauderdale

• American United Bank ($101 million) – Lawrenceville, Georgia – assets now managed by American Bank of Moultrie, Georgia

• Riverview Community Bank – Otsgeo, Minnesota – assets now managed by Central Bank

• Bank of Elmwood – Racine, Wisconsin – assets now managed by Tri City National Bank of Oak Creek, Wisconsin

• First Dupage Bank – Westmont Illinois – assets now managed by First Midwest Bank of Ithasca, Illinois 

Typically, bank failures cost the FDIC between 25 and 30% of the bank’s total assets.  The weekend failures cost the FDIC approximately $357 million.  The agency projects that bank failures will cost the FDIC a stunning $100 billion from 2009 – 2013.

The FDIC has clearly pointed to commercial real estate investment failures as the dominant factor in the downfall of community banks.  Banks with less than $10 billion in totals assets tend to be heavily vested in commercial real estate ventures where the smaller banks were able to successfully compete with larger institutions for loans.  While bigger banks also have commercial loans, they tend to represent a smaller percentage of their overall portfolio.

The 106 closings this year mark the first time more than 100 banks have been closed in a single year since 1992.  In 1989, during the savings and loan debacle, a record 531 banks were closed.  The 2009 total would be immeasurably higher than the current tally if the FDIC had available funding and an adequate number of examiners to meet the crises.

While many investors and economists have concentrated on the residential housing woes of the recession, Chairman Bair is clearly more focused on commercial real estate (CRE).  “The most prominent area of risk for rising credit losses at FDIC insured institutions during the next several quarters is in CRE lending,” Bair told the Senate subcommittee on financial institutions.

As commercial loans approach renewal dates, hotels, malls and condominium financing remain in jeopardy.  Filled with unoccupied space and dwindling property values that are 35 – 40% less than originally appraised, many of these entities are underwater and non-performing.  Active commercial real estate loans now total more than $1 trillion or 14.2% of all loans and leases in the banking industry. 

Since 2007, U.S. lenders have endured about $1.1 trillion in credit losses and write-downs.  The process of closing these banks and clearing out the distressed assets is a painful but necessary step in the overall restoration of the American banking system.

Gerard Cassidy, an analyst with RBC Capital Markets of Portland, Maine, offered the following analysis; “We certainly know there are hundreds and hundreds of zombie banks out there.  The only alternative for them is to be seized and it’s only a matter of manpower and money before they get to it.  It’s very painful, it costs a lot of money, it ruins careers, but shutting down failed banks and writing off the bad loans is a necessary solution that has to be done to get the economy and the banking system back on its feet.”

A new initiative will encourage lending institutions to recognize potential losses in their commercial real estate portfolios while not renewing the losses awaiting loss recognition.  The guiding principle is to clear the decks of troubled assets as soon as possible.  Meanwhile, Chairman Bair’s steadfast apolitical approach to the banking crises is gaining momentum and restoring credibility to the very necessary cleansing process.     

FDIC Bank Closings 2009

Bank Name City State Closing Date First DuPage Bank Westmont IL October 23, 2009 Riverview Community Bank Otsego MN October 23, 2009 Bank of Elmwood Racine WI October 23, 2009 Flagship National Bank Bradenton FL October 23, 2009 Hillcrest Bank Florida Naples FL October 23, 2009 American United Bank Lawrenceville GA October 23, 2009 Partners Bank Naples FL October 23, 2009 San Joaquin Bank Bakersfield CA October 16, 2009 Southern Colorado National Bank Pueblo CO October 2, 2009 Jennings State Bank Spring Grove MN October 2, 2009 Warren Bank Warren MI October 2, 2009 Georgian Bank Atlanta GA September 25, 2009 Irwin Union Bank, F.S.B. Louisville KY September 18, 2009 Irwin Union Bank and Trust Company Columbus IN September 18, 2009 Venture Bank Lacey WA September 11, 2009 Brickwell Community Bank Woodbury MN September 11, 2009 Corus Bank, N.A. Chicago IL September 11, 2009 First State Bank Flagstaff AZ September 4, 2009 Platinum Community Bank Rolling Meadows IL September 4, 2009 Vantus Bank Sioux City IA September 4, 2009 InBank Oak Forest IL September 4, 2009 First Bank of Kansas City Kansas City MO September 4, 2009 Affinity Bank Ventura CA August 28, 2009 Mainstreet Bank Forest Lake MN August 28, 2009 Bradford Bank Baltimore MD August 28, 2009 Guaranty Bank Austin TX August 21, 2009 CapitalSouth Bank Birmingham AL August 21, 2009 First Coweta Bank Newnan GA August 21, 2009 ebank Atlanta GA August 21, 2009 Community Bank of Nevada Las Vegas NV August 14, 2009 Community Bank of Arizona Phoenix AZ August 14, 2009 Union Bank, National Association Gilbert AZ August 14, 2009 Colonial Bank Montgomery AL August 14, 2009 Dwelling House Savings and Loan Association Pittsburgh PA August 14, 2009 Community First Bank Prineville OR August 7, 2009 Community National Bank of Sarasota County Venice FL August 7, 2009 First State Bank Sarasota FL August 7, 2009 Mutual Bank Harvey IL July 31, 2009 First BankAmericano Elizabeth NJ July 31, 2009 Peoples Community Bank West Chester OH July 31, 2009 Integrity Bank Jupiter FL July 31, 2009 First State Bank of Altus Altus OK July 31, 2009 Security Bank of Jones County Gray GA July 24, 2009 Security Bank of Houston County Perry GA July 24, 2009 Security Bank of Bibb County Macon GA July 24, 2009 Security Bank of North Metro Woodstock GA July 24, 2009 Security Bank of North Fulton Alpharetta GA July 24, 2009 Security Bank of Gwinnett County Suwanee GA July 24, 2009 Waterford Village Bank Williamsville NY July 24, 2009 Temecula Valley Bank Temecula CA July 17, 2009 Vineyard Bank Rancho Cucamonga CA July 17, 2009 BankFirst Sioux Falls SD July 17, 2009 First Piedmont Bank Winder GA July 17, 2009 Bank of Wyoming Thermopolis WY July 10, 2009 Founders Bank Worth IL July 2, 2009 Millennium State Bank of Texas Dallas TX July 2, 2009 First National Bank of Danville Danville IL July 2, 2009 Elizabeth State Bank Elizabeth IL July 2, 2009 Rock River Bank Oregon IL July 2, 2009 First State Bank of Winchester Winchester IL July 2, 2009 John Warner Bank Clinton IL July 2, 2009 Mirae Bank Los Angeles CA June 26, 2009 MetroPacific Bank Irvine CA June 26, 2009 Horizon Bank Pine City MN June 26, 2009 Neighborhood Community Bank Newnan GA June 26, 2009 Community Bank of West Georgia Villa Rica GA June 26, 2009 First National Bank of Anthony Anthony KS June 19, 2009 Cooperative Bank Wilmington NC June 19, 2009 Southern Community Bank Fayetteville GA June 19, 2009 Bank of Lincolnwood Lincolnwood IL June 5, 2009 Citizens National Bank Macomb IL May 22, 2009 Strategic Capital Bank Champaign IL May 22, 2009 BankUnited, FSB Coral Gables FL May 21, 2009 Westsound Bank Bremerton WA May 8, 2009 America West Bank Layton UT May 1, 2009 Citizens Community Bank Ridgewood NJ May 1, 2009 Silverton Bank, NA Atlanta GA May 1, 2009 First Bank of Idaho Ketchum ID April 24, 2009 First Bank of Beverly Hills Calabasas CA April 24, 2009 Michigan Heritage Bank Farmington Hills MI April 24, 2009 American Southern Bank Kennesaw GA April 24, 2009 Great Basin Bank of Nevada Elko NV April 17, 2009 American Sterling Bank Sugar Creek MO April 17, 2009 New Frontier Bank Greeley CO April 10, 2009 Cape Fear Bank Wilmington NC April 10, 2009 Omni National Bank Atlanta GA March 27, 2009 TeamBank, NA Paola KS March 20, 2009 Colorado National Bank Colorado Springs CO March 20, 2009 FirstCity Bank Stockbridge GA March 20, 2009 Freedom Bank of Georgia Commerce GA March 6, 2009 Security Savings Bank Henderson NV February 27, 2009 Heritage Community Bank Glenwood IL February 27, 2009 Silver Falls Bank Silverton OR February 20, 2009 Pinnacle Bank of Oregon Beaverton OR February 13, 2009 Corn Belt Bank & Trust Co. Pittsfield IL February 13, 2009 Riverside Bank of the Gulf Coast Cape Coral FL February 13, 2009 Sherman County Bank Loup City NE February 13, 2009 County Bank Merced CA February 6, 2009 Alliance Bank Culver City CA February 6, 2009 FirstBank Financial Services McDonough GA February 6, 2009 Ocala National Bank Ocala FL January 30, 2009 Suburban FSB Crofton MD January 30, 2009 MagnetBank Salt Lake City UT January 30, 2009 1st Centennial Bank Redlands CA January 23, 2009 Bank of Clark County Vancouver WA January 16, 2009 National Bank of Commerce Berkeley IL January 16, 2009 Sanderson State Bank En Español Sanderson TX December 12, 2008 Haven Trust Bank Duluth GA December 12, 2008 First Georgia Community Bank Jackson GA December 5, 2008 PFF Bank & Trust Pomona CA November 21, 2008 Downey Savings & Loan Newport Beach CA November 21, 2008 Community Bank Loganville GA November 21, 2008 Security Pacific Bank Los Angeles CA November 7, 2008 Franklin Bank, SSB Houston TX November 7, 2008 Freedom Bank Bradenton FL October 31, 2008 Alpha Bank & Trust Alpharetta GA October 24, 2008 Meridian Bank Eldred IL October 10, 2008 Main Street Bank Northville MI October 10, 2008 Washington Mutual Bank Henderson NV September 25, 2008 Washington Mutual Bank FSB Park City UT September 25, 2008 Ameribank Northfork WV September 19, 2008 Silver State Bank En Español Henderson NV September 5, 2008 Integrity Bank Alpharetta GA August 29, 2008 Columbian Bank & Trust Topeka KS August 22, 2008 First Priority Bank Bradenton FL August 1, 2008 First Heritage Bank, NA Newport Beach CA July 25, 2008 First National Bank of Nevada Reno NV July 25, 2008 IndyMac Bank Pasadena CA July 11, 2008 First Integrity Bank, NA Staples MN May 30, 2008 ANB Financial, NA Bentonville AR May 9, 2008 Hume Bank Hume MO March 7, 2008 Douglass National Bank Kansas City MO January 25, 2008 Miami Valley Bank Lakeview OH October 4, 2007 NetBank Alpharetta GA September 28, 2007 Metropolitan Savings Bank Pittsburgh PA February 2, 2007 Bank of Ephraim Ephraim UT June 25, 2004 Reliance Bank White Plains NY March 19, 2004 Guaranty National Bank of Tallahassee Tallahassee FL March 12, 2004 Dollar Savings Bank Newark NJ February 14, 2004 Pulaski Savings Bank Philadelphia PA November 14, 2003 First National Bank of Blanchardville Blanchardville WI May 9, 2003 Southern Pacific Bank Torrance CA February 7, 2003 Farmers Bank of Cheneyville Cheneyville LA December 17, 2002 Bank of Alamo Alamo TN November 8, 2002 AmTrade International Bank En Español Atlanta GA September 30, 2002 Universal Federal Savings Bank Chicago IL June 27, 2002 Connecticut Bank of Commerce Stamford CT June 26, 2002 New Century Bank Shelby Township MI March 28, 2002 Net 1st National Bank Boca Raton FL March 1, 2002 NextBank, NA Phoenix AZ February 7, 2002 Oakwood Deposit Bank Co. Oakwood OH February 1, 2002 Bank of Sierra Blanca Sierra Blanca TX January 18, 2002 Hamilton Bank, NA En Español Miami FL January 11, 2002 Sinclair National Bank Gravette AR September 7, 2001 Superior Bank, FSB Hinsdale IL July 27, 2001 Malta National Bank Malta OH May 3, 2001 First Alliance Bank & Trust Co. Manchester NH February 2, 2001 National State Bank of Metropolis Metropolis IL December 14, 2000 Bank of Honolulu Honolulu HI October 13, 2000

Sheila Bair Speaks Out

Soft-spoken Kansas native and tough-minded Chairman of the FDIC, Sheila Bair, is gaining a reputation on Capitol Hill.  Unlike her fellow Treasury and Federal Reserve regulators, her strongly asserted positions do not reflect any political agenda.  This causes some concern with her co-workers and on Capitol Hill, but raises admiration from the once dubious banking industry.

For the time being, Bair has spurred government assistance in her attempts to keep her ailing banks and cash strapped FDIC afloat.  Her innovative request to the nation’s bankers that they prepay three years of FDIC fees will add $39 billion to the agency’s dwindling coiffures.  Bair has the authority and has reserved her right to tap a $100 billion credit line at Treasury but has chosen to keep that option as an action of last resort.

At the rate the country’s banks are tumbling, that day may come sooner rather than later.  The FDIC is fast approaching 100 bank takeovers since the recession began.  At the close of September, banks held $1.7 trillion in commercial real estate loans and the industry is struggling under the weight of high vacancy rates and declining values.

In an interview with CNBC in advance of her appearance before the Senate Banking Committee, Bair shared her assessment of the industry and trajectory of the banking recovery.  In her candid revelations, the relationships between the FDIC, the Treasury, the Federal Reserve and the Obama Administration appeared strained.

Bair Tests Bernanke and Geithner 

Tension reached a high point between Bernanke, Geithner and Bair when the FDIC declined Citi’s application for registration with the FDIC.  Bair saw the handwriting on the wall with Citi and rejected consideration, an action that prompted a heated response from Geithner.  Three months later, Bair looks like a hero as Citi heads down the road to bankruptcy court.

Additional pressure has come from the handling of TARP funds, which many members of Congress feel should be used for the intended purpose of removing toxic assets from the banking system.  As such, these funds would be moved from the Treasury’s control to Bair’s FDIC.

Bair’s initiative to boost her depleted cash reserves is typical of her creative alternatives to taxpayer assistance.  Bair recently launched another initiative to assist troubled homeowners.  She prompted the 55 banks under FDIC control to extend forbearance programs to unemployed homeowners who had current status prior to unemployment.  The program would allow the homeowner six months to find employment before payments would have to resume.

Bair seemed pleased with he test-sample Legacy Loan Program, which placed numerous toxic assets on the market.  The program recouped $0.71 on the dollar and Bair seemed content with the results.  The implication is that the value of toxic assets could be far less and that an orderly liquidation process is necessary.  Bair would like to be involved.

Saving The FDIC

Some on Capitol Hill have pushed for a reduction in the FDIC’s role suggesting that the creation of a new, central regulatory agency would make the FDIC unnecessary.  Bair has voiced strong opposition to this proposal and insists that while the Fed, Treasury and FDIC have their differences, they also have areas of overlapping agreement.

Bair proposes that the three main existing regulatory bodies remain in tact but with more defined spheres of influence.  She has pushed Congress for clarity. 

In her Tuesday interview, Bair was guarded regarding the fate of the troubled agricultural banks and the beleaguered commercial banks.  For the most part, these banks face the unenviable position of being small enough to fail.  In the current climate, that is a bad place to be. 

Citing that baking is a lagging indicator, Bair stated that failures will continue to occur through the end of 2010.  With just $40 billion on hand, Sheila Bair may have to continue her creative solutions very quickly.

Bank	City	State	CERT #	Closing Date
Southern Colorado National Bank	Pueblo	CO	57263	October 2, 2009
Jennings State Bank	Spring Grove	MN	11416	October 2, 2009
Warren Bank	Warren	MI	34824	October 2, 2009
Georgian Bank	Atlanta	GA	57151	September 25, 2009
Irwin Union Bank, F.S.B.	Louisville	KY	57068	September 18, 2009
Irwin Union Bank and Trust Company	Columbus	IN	10100	September 18, 2009
Venture Bank	Lacey	WA	22868	September 11, 2009
Brickwell Community Bank	Woodbury	MN	57736	September 11, 2009
Corus Bank, N.A.	Chicago	IL	13693	September 11, 2009
First State Bank	Flagstaff	AZ	34875	September 4, 2009
Platinum Community Bank	Rolling Meadows	IL	35030	September 4, 2009
Vantus Bank	Sioux City	IA	27732	September 4, 2009
InBank	Oak Forest	IL	20203	September 4, 2009
First Bank of Kansas City	Kansas City	MO	25231	September 4, 2009
Affinity Bank	Ventura	CA	27197	August 28, 2009
Mainstreet Bank	Forest Lake	MN	1909	August 28, 2009
Bradford Bank	Baltimore	MD	28312	August 28, 2009
Guaranty Bank	Austin	TX	32618	August 21, 2009
CapitalSouth Bank	Birmingham	AL	22130	August 21, 2009
First Coweta Bank	Newnan	GA	57702	August 21, 2009
ebank	Atlanta	GA	34682	August 21, 2009
Community Bank of Nevada	Las Vegas	NV	34043	August 14, 2009
Community Bank of Arizona	Phoenix	AZ	57645	August 14, 2009
Union Bank, National Association	Gilbert	AZ	34485	August 14, 2009
Colonial Bank	Montgomery	AL	9609	August 14, 2009
Dwelling House Savings and Loan Association	Pittsburgh	PA	31559	August 14, 2009
Community First Bank	Prineville	OR	23268	August 7, 2009
Community National Bank of Sarasota County	Venice	FL	27183	August 7, 2009
First State Bank	Sarasota	FL	27364	August 7, 2009
Mutual Bank	Harvey	IL	18659	July 31, 2009
First BankAmericano	Elizabeth	NJ	34270	July 31, 2009
Peoples Community Bank	West Chester	OH	32288	July 31, 2009
Integrity Bank	Jupiter	FL	57604	July 31, 2009
First State Bank of Altus	Altus	OK	9873	July 31, 2009
Security Bank of Jones County	Gray	GA	8486	July 24, 2009
Security Bank of Houston County	Perry	GA	27048	July 24, 2009
Security Bank of Bibb County	Macon	GA	27367	July 24, 2009
Security Bank of North Metro	Woodstock	GA	57105	July 24, 2009
Security Bank of North Fulton	Alpharetta	GA	57430	July 24, 2009
Security Bank of Gwinnett County	Suwanee	GA	57346	July 24, 2009
Waterford Village Bank	Williamsville	NY	58065	July 24, 2009
Temecula Valley Bank	Temecula	CA	34341	July 17, 2009
Vineyard Bank	Rancho Cucamonga	CA	23556	July 17, 2009
BankFirst	Sioux Falls	SD	34103	July 17, 2009
First Piedmont Bank	Winder	GA	34594	July 17, 2009
Bank of Wyoming	Thermopolis	WY	22754	July 10, 2009
Founders Bank	Worth	IL	18390	July 2, 2009
Millennium State Bank of Texas	Dallas	TX	57667	July 2, 2009
First National Bank of Danville	Danville	IL	3644	July 2, 2009
Elizabeth State Bank	Elizabeth	IL	9262	July 2, 2009
Rock River Bank	Oregon	IL	15302	July 2, 2009
First State Bank of Winchester	Winchester	IL	11710	July 2, 2009
John Warner Bank	Clinton	IL	12093	July 2, 2009
Mirae Bank	Los Angeles	CA	57332	June 26, 2009
MetroPacific Bank	Irvine	CA	57893	June 26, 2009
Horizon Bank	Pine City	MN	9744	June 26, 2009
Neighborhood Community Bank	Newnan	GA	35285	June 26, 2009
Community Bank of West Georgia	Villa Rica	GA	57436	June 26, 2009
First National Bank of Anthony	Anthony	KS	4614	June 19, 2009
Cooperative Bank	Wilmington	NC	27837	June 19, 2009
Southern Community Bank	Fayetteville	GA	35251	June 19, 2009
Bank of Lincolnwood	Lincolnwood	IL	17309	June 5, 2009
Citizens National Bank	Macomb	IL	5757	May 22, 2009
Strategic Capital Bank	Champaign	IL	35175	May 22, 2009
BankUnited, FSB	Coral Gables	FL	32247	May 21, 2009
Westsound Bank	Bremerton	WA	34843	May 8, 2009
America West Bank	Layton	UT	35461	May 1, 2009
Citizens Community Bank	Ridgewood	NJ	57563	May 1, 2009
Silverton Bank, NA	Atlanta	GA	26535	May 1, 2009
First Bank of Idaho	Ketchum	ID	34396	April 24, 2009
First Bank of Beverly Hills	Calabasas	CA	32069	April 24, 2009
Michigan Heritage Bank	Farmington Hills	MI	34369	April 24, 2009
American Southern Bank	Kennesaw	GA	57943	April 24, 2009
Great Basin Bank of Nevada	Elko	NV	33824	April 17, 2009
American Sterling Bank	Sugar Creek	MO	8266	April 17, 2009
New Frontier Bank	Greeley	CO	34881	April 10, 2009
Cape Fear Bank	Wilmington	NC	34639	April 10, 2009
Omni National Bank	Atlanta	GA	22238	March 27, 2009
TeamBank, NA	Paola	KS	4754	March 20, 2009
Colorado National Bank	Colorado Springs	CO	18896	March 20, 2009
FirstCity Bank	Stockbridge	GA	18243	March 20, 2009
Freedom Bank of Georgia	Commerce	GA	57558	March 6, 2009
Security Savings Bank	Henderson	NV	34820	February 27, 2009
Heritage Community Bank	Glenwood	IL	20078	February 27, 2009
Silver Falls Bank	Silverton	OR	35399	February 20, 2009
Pinnacle Bank of Oregon	Beaverton	OR	57342	February 13, 2009
Corn Belt Bank & Trust Co.	Pittsfield	IL	16500	February 13, 2009
Riverside Bank of the Gulf Coast	Cape Coral	FL	34563	February 13, 2009
Sherman County Bank	Loup City	NE	5431	February 13, 2009
County Bank	Merced	CA	22574	February 6, 2009
Alliance Bank	Culver City	CA	23124	February 6, 2009
FirstBank Financial Services	McDonough	GA	57017	February 6, 2009
Ocala National Bank	Ocala	FL	26538	January 30, 2009
Suburban FSB	Crofton	MD	30763	January 30, 2009
MagnetBank	Salt Lake City	UT	58001	January 30, 2009
1st Centennial Bank	Redlands	CA	33025	January 23, 2009
Bank of Clark County	Vancouver	WA	34959	January 16, 2009
National Bank of Commerce	Berkeley	IL	19733	January 16, 2009
Sanderson State Bank En Español	Sanderson	TX	11568	December 12, 2008
Haven Trust Bank	Duluth	GA	35379	December 12, 2008
First Georgia Community Bank	Jackson	GA	34301	December 5, 2008
PFF Bank & Trust	Pomona	CA	28344	November 21, 2008
Downey Savings & Loan	Newport Beach	CA	30968	November 21, 2008
Community Bank	Loganville	GA	16490	November 21, 2008
Security Pacific Bank	Los Angeles	CA	23595	November 7, 2008
Franklin Bank, SSB	Houston	TX	26870	November 7, 2008
Freedom Bank	Bradenton	FL	57930	October 31, 2008
Alpha Bank & Trust	Alpharetta	GA	58241	October 24, 2008
Meridian Bank	Eldred	IL	13789	October 10, 2008
Main Street Bank	Northville	MI	57654	October 10, 2008
Washington Mutual Bank	Henderson	NV	32633	September 25, 2008
Washington Mutual Bank FSB	Park City	UT	32633	September 25, 2008
Ameribank	Northfork	WV	6782	September 19, 2008
Silver State Bank En Español	Henderson	NV	34194	September 5, 2008
Integrity Bank	Alpharetta	GA	35469	August 29, 2008
Columbian Bank & Trust	Topeka	KS	22728	August 22, 2008
First Priority Bank	Bradenton	FL	57523	August 1, 2008
First Heritage Bank, NA	Newport Beach	CA	57961	July 25, 2008
First National Bank of Nevada	Reno	NV	27011	July 25, 2008
IndyMac Bank	Pasadena	CA	29730	July 11, 2008
First Integrity Bank, NA	Staples	MN	12736	May 30, 2008
ANB Financial, NA	Bentonville	AR	33901	May 9, 2008
Hume Bank	Hume	MO	1971	March 7, 2008
Douglass National Bank	Kansas City	MO	24660	January 25, 2008
Miami Valley Bank	Lakeview	OH	16848	October 4, 2007
NetBank	Alpharetta	GA	32575	September 28, 2007
Metropolitan Savings Bank	Pittsburgh	PA	35353	February 2, 2007
Bank of Ephraim	Ephraim	UT	1249	June 25, 2004
Reliance Bank	White Plains	NY	26778	March 19, 2004
Guaranty National Bank of Tallahassee	Tallahassee	FL	26838	March 12, 2004
Dollar Savings Bank	Newark	NJ	31330	February 14, 2004
Pulaski Savings Bank	Philadelphia	PA	27203	November 14, 2003
First National Bank of Blanchardville	Blanchardville	WI	11639	May 9, 2003
Southern Pacific Bank	Torrance	CA	27094	February 7, 2003
Farmers Bank of Cheneyville	Cheneyville	LA	16445	December 17, 2002
Bank of Alamo	Alamo	TN	9961	November 8, 2002
AmTrade International Bank En Español	Atlanta	GA	33784	September 30, 2002
Universal Federal Savings Bank	Chicago	IL	29355	June 27, 2002
Connecticut Bank of Commerce	Stamford	CT	19183	June 26, 2002
New Century Bank	Shelby Township	MI	34979	March 28, 2002
Net 1st National Bank	Boca Raton	FL	26652	March 1, 2002
NextBank, NA	Phoenix	AZ	22314	February 7, 2002
Oakwood Deposit Bank Co.	Oakwood	OH	8966	February 1, 2002
Bank of Sierra Blanca	Sierra Blanca	TX	22002	January 18, 2002
Hamilton Bank, NA En Español	Miami	FL	24382	January 11, 2002
Sinclair National Bank	Gravette	AR	34248	September 7, 2001
Superior Bank, FSB	Hinsdale	IL	32646	July 27, 2001
Malta National Bank	Malta	OH	6629	May 3, 2001
First Alliance Bank & Trust Co.	Manchester	NH	34264	February 2, 2001
National State Bank of Metropolis	Metropolis	IL	3815	December 14, 2000
Bank of Honolulu	Honolulu	HI	21029	October 13, 2000

Sheila Bair – Gets It Done!

FDIC Chairman Sheila Bair is the tough-minded, fiercely independent advocate of the Federal Deposit Insurance Corp.  Sheila Bair does not mince words.  Bair makes decisive moves and backs them up with tough policy.

Under her tenure the FDIC has seized 95 banks this year.  The most recent casualty is Georgian Bank based in Atlanta.  Georgian Bank has five offices and a real estate development clientele that has struggled mightily during the recession.  19 of the FDIC takeovers have been Georgia-based banks.

First Citizens Bank and Trust of South Carolina has agreed to assume all the deposit of the newest bank to fail.  Georgian Bank has $2 billion in assets and $2 billion in deposits.  The failure will further deplete the FDIC’s dwindling fund by $892 million. 

Georgian Bank was chartered in 2001 and was an instant success.  The bank serviced the booming residential housing market with loans while quickly becoming the second largest bank in Atlanta and the fifth largest in the state.  Hard times came fast to Georgian as the real estate market plummeted and took Georgian’s biggest clients with it.

In 2007, only three banks failed, while 25 banks were seized last year.  The 95 failures this year is high but a far cry from the 534 banks that failed during the savings and loan crisis in 1989. 

Bair has said that the damage is far from over.  The feisty chairman regards bank failures as a lagging indicator and has suggested that mid-sized and small commercial banks will soon be feeling pressure from the ailing commercial real estate sector.

FDIC Fund Running Low

Not surprisingly the 95 bank failures have depleted the FDIC’s insurance fund and threatened the agencies ability to regulate effectively.  Bair has been hesitant to tap into the $500 billion credit line with Treasury.  She cites the negative effects of a simulated bailout.

Instead, the Chairman ha proposed a system of voluntary contributions from the country’s banks.  Industry insiders report the strategy has been well received.  By prepaying regular assessments for three years, Bair would raise $36 billion to replenish the fund.  If Bair’s plan includes special assessment, the fund would stand to gain $45 billion.

Currently, the account has a mere $10.4 on hand although the FDIC has another $32 billion in reserves.  One year ago, the insurance fund was well stocked at $45 billion in cash.

If her plan is accepted, banks will be permitted to record the fees in the years in which they would normally have been paid.  If Bair’s plan receives approval from the Board, the plan will be open to public debate for 30 days before it is enacted.

Bair’s request underscores her position that more damage is on the way.  As the commercial real estate failures continue to mount, damages could well become more localized.

Bair and Geithner at Odds

Strong will have crossed paths as Treasury Secretary and Chairman Bair continue to promote different positions about the recession, the recovery and regulation reform.  Geithner has strongly lobbied for the Obama Administration’s course of action while Bair stubbornly resists broad acceptance of administration changes.

On Wednesday, Bair and John Dugan, the Comptroller of the Currency and the Office of Thrift Supervision, appeared before the House Financial Services Committee to voice opposition to the creation of Consumer Financial Protection Agency.  Earlier in the day, Geithner had strongly supported the creation of the CFPA.  Bair and Dugan challenged the committee’s chair barney Frank who is a supporter of the plan.

Bair and Dugan recommend stronger laws and more authority to existing regulatory agencies.  Both leaders suggested that the new agency would diminish the authority of the current regulators.

The debate is highlights the growing tension between Geithner and Bair.  The two have crossed swords on several issues recently.  Bair’s FDIC strives to regulate independently and thus far has strong support from the banking community.

The G20 – Conflicted Momentum

Later today the G20 officially convenes but indications are that momentum on three key fronts is conflicted.  At a time when give-and-take progress is necessary, the world’s economic leaders seem unable or unwilling to assert decisive leadership that many believe is necessary to reform global financial institutions.

With some signs of stabilization playing out in most international economies, the urgency that permeated the Spring G20 summit in London is absent.  Government leaders are pulling back from concerted efforts to thwart the symptoms that caused the deepest recession in global history.

Prior to the economic rebound, there appeared three main concerns the G20 would address: 

• Executive compensation limits
• Establishment of capital limits for banks
• Regulatory reform for financial institutions

While there is some harmony in setting guidelines for executive compensation, that issue may be the only area where quantitative progress is made.  At this G20 meeting, rhetoric may well replace policy initiatives.

Regarding the establishment of capital limits for banks and massive regulatory reforms called for in London, national interests have overtaken global initiatives.  Basically, national economies do not want to be the first to pull the trigger.

The U.S. Reigning In

On Wednesday, the U.S. Federal Reserve said that growth had returned to the U.S. economy.  With congressional leaders and the Obama Administration locked in heated debates regarding health care and the War in Afghanistan, some of the momentum for financial reform has been lost.

The Administration suggests that the economy is on the mend.  While there is growth in many sectors, two central issues remain under extreme pressure.  There is no significant progress on the unemployment front and housing, while active, remains 30-35% below peak values in 2006-2007.

Impact from a failing commercial real estate market, where values have plunged and vacancy rates soared, appears to be swept under the table.  While The Fed is hanging its hat on growth, Chairman Bernanke announced that the U.S. stimulus spending may pull back but would remain in place.

The Fed also announced it would keep interest rates at near zero levels.  The result of the Fed’s announcement kept the dollar reeling. 

At the same time, International Monetary Chief Dominique Strauss-Kahn urged economic powers to sustain their quantitative easing policies.  With global unemployment rising to the top of international concerns, Strauss-Kahn said; “Once the fire is out, there’s water everywhere.  It has to be mopped up.  In Pittsburgh, we have to say, there are still fires to be put out, we’ll see later how to do the mopping.”

President Obama has asked international consumerism to join the recovery.  At a time where China has reaped big rewards from increased export business, world economies continue to look to the tired and battered U.S. consumer to lead the recovery.

In 2008, the American consumer saved just 3 percent while the typical Chinese household save 40 percent of earnings.  Obama’s push for balance in consumption has support at the G20 but will meet stubborn resistance from Germany, the world’s top exporter, and China.

Private consumption in the U.S. and Great Britain exceed 70 percent of household income while China’s consumption barely exceeds 33%.  Led by 10% unemployment and equity losses in stocks and housing, the American consumer is likely to retreat from excessive consumerism.  Obama stressed that the recovery will fall short if the American consumer is the source.

Europe Faces Compensation – Obama Faces Balance

When the leaders take the stage today, Europe will press for financial regulatory reform and may walk away with loose agreements regarding compensation limits. On the other hand, Obama is pressing for coordination of balances between export nations and import nations.

On the reform issue, Europe has long held the lax risk management policies of the U.S. and Great Britain have been the root cause of the recession.  The European leaders stress the need for reform to thwart another recession and replace the current V recovery shape with a W. 

After the G20 Spring meeting, President Obama and Congress appeared to have impetus for financial reform.  Of late, that commitment has waned as the President’s health care stance has put the administration under extreme pressure and created a lack of congressional harmony.

Geithner Impressive

For many Americans, Secretary Geithner’s performance in heated Senate debates one year ago was less than inspiring.  In fact, it was unnerving and caused stock markets to tumble and countless cries for his replacement.  Many felt the Secretary seemed over-matched and under-qualified.  One year ago, Treasury Secretary Geithner was operating on little to no sleep and facing a treacherous condition that could have escalated into a worldwide economic collapse.

A very different, composed and confident Secretary Timothy Geithner addressed the nation in a Town Hall styled meeting hosted by CNBC on Thursday evening.  The meeting marked the end of a very public and long day for the Secretary who earlier in the day appeared before the Congressional Oversight Committee.  In keeping with the core performers in the Obama Administration, the Secretary stayed on message emitting a balance of confidence and concern about the recession and the current recovery.

Citing the events of the past year, Geithner painted a bleak summary of the economy’s condition one year ago when Lehman Brothers collapsed.  Pointing a sharp finger at the lax regulatory standards of the previous administration, Geithner pledged that stringent regulations were in effect and would remain in place in the future.

Under questioning from CNBC co-hosts Steve Leisman and Erin Burnett and an interested audience, the Treasury Secretary made it clear that the financial system stood at the brink of collapse one year ago.  The government was forced to intercede to save the financial system.

The Government’s Path

Geithner made it clear that had the Treasury and Federal Reserve not taken a pro-active role in saving the financial sector, the economy would have collapsed and taken global economies with it. 

The Secretary was pressed about the role of government in the economy in the future.  On more than one occasion, he stated that an early exit by government could lead to another recession.  While the economy has entered the recovery stage, more stimulus and more thorough regulation will be needed to prevent a recurrence.

“We’re going to be careful not to withdraw too soon.  The classic mistake that countries make in crises is they put the brakes on too early, they re-ignite the recession ultimately at much greater fiscal costs and much greater damage to the economy.  That’s the balance we’ve got to get right.”

Geithner made it clear that he did not relish the present level of government activity but that there was no option at this time.  The Secretary painted a bleak picture of the American employment scene stating that unusually high levels of unemployment would exist for a long time.  He also indicated that the recovery was fragile and would occur over an extended period.  He did not rule out the strong possibility of a further dip in housing values.

Risk Taking and Regulation

Secretary Geithner discussed the risk taking mindset of American financials on two occasions.  He suggested that the exorbitant bonuses paid to financial executives who were rewarded for improper risk taking.  Geithner made it clear that uncontrolled risk had led to the collapse and that this administration would not rest until proper controls were in place.

“We have to put much stronger rules of the game in place with much stronger constraints on how much risk can take place.  People are so angry.  They have had this searing experience that caused so much damage and I think generally people understand that we’re going to have to change things.  We can’t let things go back to the way they were.”

At the same time, Geithner made it clear that he did not feel Treasury should remain involved in the financials any longer than absolutely necessary.  When Geithner came on board, the government invested more than $200 billion in U.S. financials.  Since then, more than $80 billion has come back to Treasury.  Another $50 billion is expected in the near future.  Meanwhile many of the government’s investments have been profitable.

Tax Increases

On the unpopular possibility of increased taxes, the Secretary was subtle but pointed.  His most telling statement was greeted by surprising support from the audience.  “… the world needs to understand that we’re going to bring these deficits down.  And that means we’re going to have to bring our commitments and our resources closer into balance.”

There seemed little doubt that Geithner believes tax increase will b e necessary to pay down the country’s new obligations.

In acknowledging the high rate of foreclosures and small business failures suffered by innocent bystanders, Geithner expressed regret that so many had suffered.  He repeated the Obama administration’s refrain that these tragedies did not occur on his watch.

Geithner’s analytical take on the current condition was far from optimistic.  “We’re going to make progress.  It’s not going to be even and quick.  I think things are going to feel just hard, unacceptably hard, for a long period of time.  But, because we want to fix this right, it’s going to take a while.”

CAM Posts Another Gain

CEO Report 12-08-08

Custodio Asset Management CEO, Ace Custodio, praised CIS Almond Custodio, for his disciplined wealth management strategy.  For the week ending 12-05-08, CAM’s portfolio gain rose another +1.903% net of fees.  Through a series of solid investments, the 2008 year-to-date growth rose to +21.241% net of fees at a time when the S&P 500 has fallen to new lows at -40.337% and the Nasdaq 100 stands at a dismal -43.506%.

Since the company’s inception in October 2005, the investment portfolio’s limited exposure, maximum return strategy reached a new benchmark on December 5, 2008 at + 173.790% net of fees.  During the same period, the S&P stands at -28.706% and the Nasdaq 100 shows losses of -26.459%.

To accommodate the influx of new retail and institutional investors, CAM has refined its streamlined three step account origination process.  Details of this 24/7 easy-to-access, highly transparent process will be available on this site on Wednesday 12-10-08.

If you or someone you know would like information about CAM or its services, please contact the company at info@camtrading.com or by telephone at 1-410-988-2511. 

The Bear Has No Favorites!

The Bear Strikes! 

The performances of some of the most revered icons of the investment world deliver a clear advisory about the serious declines within the current marketplace.  The rules of value investing are changing and this is no time for the feint of heart.  CAM believes that the changing market conditions are creating gain potential for the serious, disciplined and forward-thinking investor.

 A look at these prominent investment funds delivers the verdict that the Bear does not discriminate. 

 Berkshire Hathaway                    Warren Buffett           -43% ytd

CMG Focus Fund                          Ken Hebner                -56% ytd

Legg Mason Value Trust               Bill Miller                    -50% ytd

Citadel                                          Ken Griffin                   -44% ytd

T. Boone Pickens                            -$2 billion since July

Kirk Kerkorian                                -$693 million on Ford alone

 Berkhsire Hathaway is a long term investor and it may be too early to rate the company’s investment, but according to Bloomberg, the company’s cost of credit-swaps, or insurance against default, has tripled in the past few months.  Buffett’s bold moves in financials, including Goldman Sachs, have failed to stabilize his holdings amidst the tumultuous Bear Market swings.

The bottom line is that the Bear shows no favorites.  Successful strategies in this market require discipline, transparency and an ability to execute.  Investors need to throw out the outdated value formulas and invest with professional 21^st century investment strategists.

As of November 14, 2008, CAM posted gains of +17.4% net of fees, year-to-date.  Since October 2005, the company’s portfolio gain is +165%.

Info@Camtrading.com

Custodio Asset Management

410-988-2511

Message from the CIS

From Almond Custodio – 11-19-08:

Question to CAM:

After viewing Fast Money on Friday 11-14-08, I was surprised to see their recommendation to break away from traditional buy and hold strategies.  They indicated that if this was an individual investor’s strategy, they have not profited over a ten year span.  What does CAM say?

source: finance.yahoo.com

 

Year	S&P 500			Year	Dow
1980	135.76			1980	963.98
1981	122.55	-9.73%		1981	875.00	-9.23%
1982	140.64	14.76%		1982	1,046.55	19.61%
1983	164.93	17.27%		1983	1,258.64	20.27%
1984	167.24	1.40%		1984	1,211.57	-3.74%
1985	211.28	26.33%		1985	1,546.67	27.66%
1986	242.17	14.62%		1986	1,895.95	22.58%
1987	247.08	2.03%		1987	1,938.83	2.26%
1988	277.72	12.40%		1988	2,168.57	11.85%
1989	353.40	27.25%		1989	2,753.20	26.96%
1990	330.22	-6.56%		1990	2,633.66	-4.34%
1991	417.09	26.31%		1991	3,168.83	20.32%
1992	435.71	4.46%		1992	3,301.11	4.17%
1993	466.45	7.06%		1993	3,754.09	13.72%
1994	459.27	-1.54%		1994	3,834.44	2.14%
1995	615.93	34.11%		1995	5,117.12	33.45%
1996	740.74	20.26%		1996	6,448.27	26.01%
1997	970.43	31.01%		1997	7,908.25	22.64%
1998	1,229.23	26.67%		1998	9,181.43	16.10%
1999	1,469.25	19.53%		1999	11,497.12	25.22%
2000	1,320.28	-10.14%		2000	10,786.85	-6.18%
2001	1,148.08	-13.04%		2001	10,021.50	-7.10%
2002	879.82	-23.37%		2002	8,341.63	-16.76%
2003	1,111.92	26.38%		2003	10,453.92	25.32%
2004	1,211.92	8.99%		2004	10,783.01	3.15%
2005	1,248.29	3.00%		2005	10,717.50	-0.61%
2006	1,418.30	13.62%		2006	12,463.15	16.29%
2007	1,468.36	3.53%		2007	13,264.82	6.43%
2008	930.99	-36.60%		2008	8,943.81	-32.57%
	Since 12/31/97	-4.06%			Since 12/31/97	13.09%

1.           What has caused this change of heart?

In short, the change of heart is in the data of the last 10 years.  The greatest bull market in history started in 1982 and ended in 1999, where the S&P 500 gained 1,098%, in 18 years.  Ironically, since January 1^st 2000, the markets are down 36.63%, which is roughly the same decline as the market year-to-date.

Some long-term investors still make the case that this is “short term.”  After all, since 1981, the market is still up 659%.  However, lately, the buy and hold strategy is losing its validity.  The market has erased all profits in the last ten years, and sadly, the only growth has been from from hard-earned contributions that would have been better off in the bank.   

How long will this bear market be?  No one knows.  The market is dynamic.  No two years are exactly alike in the market, and just because the market is down 36% this year, does not mean we’re at bottom or that we will rally from this point on as happened in 2003.

Due to the magnitude of the drawdown this year, the market has to make 57.7% from 930.99 just to get to break-even of 1468.36.  Although, it’s not impossible in the next few years, unfortunately, many Americans who planned on retiring soon will now have to continue working indefinitely.

CIS Report 10-22-08

Message from the CIS

On September 26, 2008, I mentioned the Volatility Index.  At that point the VIX was trading at 35 which marked the highest levels since the last bear market in 2002.  Three weeks later, the VIX hit an all-time high of 81.17 on 10/16/08.  On that same day, the S&P 500 closed at 946.43.  Three weeks filled with Congressional action, capital infusion, global rate cuts and the Fed purchasing stakes in banks, failed to boost market confidence as our markets remain 22% lower.

There is a loss of confidence in the markets in recent weeks.  The daily volatility compares to rates during the Great Depression.  And, this is undeniably a global crisis.  The Nikkei lost 33% in one week, the Bovespa Index of Brazil is down 30% in one month and the UK FTSE 100 has lost 23% in one month.

Given this uncertainty, CAM has maintained a disciplined investment strategy.  Just as volatility can work in the CAM investor’s favor, it can also be detrimental.  At CAM, we seek consistency and wealth preservation.  As the markets are now trading 5-10 times normal volatility, CAM has reduced its invested exposure.  CAM clients can feel secure that the company is not subscribing to buy and hold strategies.  In these turbulent times, CAM is standing by its proven strategy of portfolio growth.

Self-directed 401(k) Plans

How self-directed retirement plans benefit the institutions and not the participating investors.

By Almond Custodio, CIS                           info@www.camtrading.com

New CAM clients report extreme frustration with their self-directed 401(k) investment plans.  In these turbulent times, investors are paying more attention to the bottom line, where it becomes clear to most that self-directed 401(k) plans serve to the primary benefit of the provider, not the individual investor.  This realization supports the proactive CAM investment strategy, but surprises and angers many investors who have previously had accounts at large investment firms only to see their portfolios diminish by 30 – 40% year-to-date.                                                                                                                           

At large investment firms, self-directed 401(k) plans are subject to substantial service fees even though the participant does the actual work.  For example, in a typical 401(k), the employee selects from 10-15 funds offered by the provider.  The employee determines the allocation of these funds and moves money accordingly.  This is nothing more than an induced buy-and-hold strategy, which strategy has crumbled in the wake of the current market turbulence.  The provider charges a fee to assist investors who may want to customize their portfolio.  Otherwise, the provider does not offer technical or fundamental assistance to help the participants.  401(k)s and other self-directed retirement plans are a no risk, all gain situation for large investment firms.

Usually the funds within these plans are merely a mirror image of market performance.  A “Large-Cap Mutual Fund” is nothing more than a reflection of the DOW 30, which is down about 40% for the year and near the 1998 levels.  With little oversight and less supervision, these important retirement funds have diminished so significantly that many individuals who thought they would be retiring will now be hoping their jobs are secure.  Meanwhile, the fees tightly wrapped in the fine print of the prospectus are still being charged.

In addition to these individual participation fees, the provider usually charges additional fees to the contributing business.  This service fee is especially offensive because the participants are still managing their funds.  The service fee includes sending a statement, invoicing the business and sending out a coffee mug every now and then.  In most cases, that is the total effort exerted by the provider.

Meanwhile, the providers write stringent rules that govern 401(k) plans.  High penalty fees are charged if the fund is moved.  Those penalties apply to the business and to the participants.  Individual investors have been trapped as their savings diminish. 

CAM believes lawmakers need to act to relieve the participants so they can move their funds without penalty.  Meanwhile, investors who subscribe to “buy-and-hold” need to check their portfolios and realize this is not a viable 21^st century strategy.

Self-directed plans have minimal benefits.  They present tax-deferred status, but there are many ways to accomplish this end result.  401(k) plans also present the maximum yearly contribution to qualify for deferred status, and there is the appeal with the employer contribution.  However, in an effort to reflect growth, most providers choose to show the employer contribution as a portfolio gain. 

Frustrated investors with large investment firms are not only impressed with the 144 % growth rate that the CAM has achieved in its first three years, but they are complimentary about the easy access to account managers and the straight-forward transparency of their accounts.  All CAM income is directly connected to performance.  New client enrollment is at record levels and interest in the company is at its highest peak in the three years the company has operated.

 www.Camtrading.com