Friday, December 31, 2010

From the Post-Crash Ashes

Who Gets to Rebuild America?

The Great Financial Panic of 2008-2009 is receding into the past. Most of our larger financial institutions appear, at least on the surface, to be on the mend. The economy looks to be on the road to recovery.

But not so fast. The saga of the financial collapse is not over. More damage is being done each day. It is a tale of quiet attrition wearing down the small businesses. There are still small disaster stories to tell, though they will not likely make big headlines. The legacy of loss lingers.

An Epochal Crash

By historical standards the 2007 residential real estate bust was big. Real U.S. home prices had nearly doubled between 1990 and 2006. From the rise to the fall, trillions of dollars of household equity has gone up in smoke. Home prices as measured by the S&P Case-Shiller Index of value in 20 cities is down 29 percent from the 2006 peak levels. Caroline Baum (Bloomberg Opinion from Dec 5, 2010) observed that “Owners’ equity in household real estate…fell from a peak of $13.1 trillion in 2005 to a low of $5.9 trillion in the first quarter of 2009, according to the Fed’s Flow of Funds report. That’s a whopping 55 percent decline in four years.”

While the money flowed through the US housing system and the real estate bubble inflated, land developers, home builders, banks, mortgage brokers, loan packagers, mortgage “securitizers” and rating agencies (among others) chose not to stay safely on the sidelines. We were all happily aboard the bubble machine. As a well known big banker noted, this was such sweet financial music that no one could afford to stop dancing before the music stopped.

The music stopped. And home builders, small AND big, got whacked.

Bank of Clark County, Vancouver WA

A chapter of this story began on Friday January 16, 2009 when the State of Washington shut down Bank of Clark County (“BOCC”) based in Vancouver WA. BOCC was one the first two US bank failures to occur in 2009 in a wave of closures that would see 140 banks closed in 2009 and over 150 banks closed so far in 2010.

BOCC was founded in 1999. It was a smaller bank with $446.5 million in total assets and $366.5 million in deposits. As with many community banks, BOCC had an exposure to commercial real estate in loans made to builders and developers; construction and development loans, particularly for residential development made up over 36 percent of the bank's total portfolio.

At the closure of BOCC, Umpqua Bank of Eugene Oregon agreed to assume the deposits and branches but decided not to take over the Bank of Clark County's $352 million loan portfolio. Umpqua in the past two years has very been shrewd in acquiring numerous failed banks but the BOCC commercial loans were apparently too hairy for Umpqua to take over. As a regional player, Umpqua probably had good market intelligence on the condition of BOCC portfolio.

FDIC “Multibank” Structured Transactions

To deal with the assets of failed banks that were not sold to FDIC-assisted banks via loss sharing, the FDIC has either auctioned off assets as-is in either pools or individually, or has employed a financial vehicle called the "structured sale" where the FDIC sells the assets into a joint venture with a private-sector investor/manager to wait out the bad real estate market hoping to realize higher assets price at a later date when the market had improved.

The FDIC commented in a July 2010 Bloomberg article explaining, “What we’re trying to avoid is creating the kind of financial incentives that cause the liquidation of the portfolio at fire-sale prices, which could further depress already distressed markets.... The structured transaction enables the FDIC’s managing partner to take a longer-term approach to the loans, allowing for an orderly workout period.”

The FDIC took delivery of the BOCC loans, and by the end of 2009 had pooled BOCC assets with the assets of 22 other failed banks into what the FDIC calls a “Multibank Structured Transaction” or Multibank Structured Transaction 2009-1 CML-ADC and Multibank 2009-1 RES-ADC Venture LLC (“Multibank”), in the case of BOCC. These structured transactions are but two of 16 completed and disclosed by the FDIC to date, involving the orphan bank assets of numerous failed institutions adding up to a total book value of over $18.7 billion.

The “ADC” in MULTIBANK 2009-1 RES-ADC VENTURE LLC and MULTIBANK 2009-1 CML-ADC VENTURE LLC stands for Acquisition Development and Construction Loans. These were credit facilities provided by banks and, in the case of the structured sale asset packaged by the FDIC, were loans made by smaller community or regional banks to local developers to finance the purchase, entitlement, horizontal and vertical development of raw land being transformed into residential or commercial property.

In February of 2010 the two loan pools (totaling $3.052 billion in book value) were acquired in a structured transaction by Rialto Capital Management LLC (a subsidiary of Lennar Corporation "LEN") in partnership with the FDIC for a combined (or “implied”) price of $1.22 billion, or about 40 cents of book value. The FDIC retains 60% ownership in the pool of assets, Rialto acquired a 40% position. The collateral for the acquired loans was a mix of residential and commercial land and construction projects in various markets across the US.

Deal Points

--The FDIC transaction provides the private-sector partner zero-percent financing, asset management fees to manage assets in the venture.

--In this deal the management fee is .5 percent of outstanding debt (the unpaid balance or UPB), roughly $15 million per year to begin with.

--The partnership does not allow for a partial sale or liquidation of the assets. The loans are to be "worked out".

--The FDIC’s profit split increases to 65% (from original 60%) upon the “First Incentive Threshold Event” when a 25% annualized yield has been achieved and to 70% (from 65%) at the “Second Incentive Threshold Event” when a 35% yield has been hit.

Limited Price Discovery in a Less Than Arms-Length Sale

The use by the FDIC of low cost leverage that has many outcomes, not the least of which is to increase the price of the assets. The widely held consensus is that sans the FDIC's backstopping of these deals, the assets would have likely sold for half what was paid by the venture. 

As the Wall Street Journal noted in February 2010, “Undoubtedly, if someone had to purchase this with all cash, it would be 20 to 25 cents on the dollar". "The sale may prove an important bell-weather transaction for home builders and other opportunistic investors looking to take advantage of the housing carnage and snap up land on the cheap. But it may not provide much clarity about the value of commercial real estate clogging the books of the nation’s banks."

Structured Deal Workout Strategy: Opportunistic Buyers Buy High and Sell Even Higher

The FDIC/Rialto business plan is to “resolve" the loans. The loans may be either restructured with the current borrower or foreclosed on by the investor and become real estate owned (OREO) by the FDIC/Rialto partnership. The annualized yield on the investment will depend on how many years it takes to resolve the assets, how long it takes to convert the assets to cash. The seven year investment horizon is long. The expectations are for a healthy, double digit return. The math is simple. The loans or the real estate securing the loans (once foreclosed on) are a commodity that a large investor/ builder like Rialto/Lennar are expert at valuing, developing and ultimately selling.

One “Multibank” Borrower

One company that got swept up into the MULTIBANK 2009-1 vortex we will call “SmallCo”. SmallCo is a local homebuilder operating in one of the major Pacific Northwest US markets. The company had a $3 million development loan from Bank of Clark County secured by a 45-lot residential subdivision.

As SmallCo told the local press, their effort to refinance the residential development loan with other banks proved fruitless. For the most part banks today are not making new real estate loans but are purging their balance sheets as they can of any real estate development and construction loans, even if their borrowers have somehow managed to preserve their creditworthiness. Residential or commercial real estate collateral is an anathema to banks that no strong banking relationships can alter. The regulators in most cases require these loans to be written down because the value of the collateral (land) is much less than the outstanding loan balance.

SmallCo reported that it was able to refinance a few other of its bank construction loans on other projects, probably after the former bank loans had been sold by the FDIC to individual investors at all cash auctions or the banks may have 'sold' the deeply-discounted assets themselves. The cash spot market has resulted in outright assets sales, at more deeply discounted prices, providing more room to bring in new investment at a lower and sustainable cost basis.

Individual asset sales are outright do not have long term investment structure that the Multibank transactions do. The Multibank structure prohibits speculative asset sales (perhaps rightly) but the premium pricing paid for the assets may not provide for the same room and flexibility to negotiate discounts as the FDIC individual outright asset sales have.

SmallCo Gets the Word from Multibank

These are eight words no developer wants to hear from their bank: “Your loan is due and payable in full.”

SmallCo and other Multibank borrowers got this message. It has been reported that the Multibank venture had filed suit against SmallCo and other Multibank borrowers for the full amount of the money owed on their real estate loans. Multibank is likely acting well within their legal rights. Most development and construction loans are short term loans.

SmallCo told us that the value of the lots in question are now half of where they had started. At the peak the residential lots were were $100,000 each, but now were valued at closer to $40,000 to $50,000 each. Not too bad when you consider that some troubled residential developments are currently considered worthless (where the estimated cost to finish the project exceeds today's value). SmallCo offered to pay the loan off at a discount with new capital, offering 70 cents on the dollar to pay off the loan (a healthy markup on the 40% portfolio average price).

They told us they even flew to New York to meet the Multibank representatives to see if something could be worked out but no compromise could be reached.

SmallCo employs a handful of workers and has had to cut back on his crew. A foreclosure on the 45 lot property might mean bankruptcy for the company.

Small and Big But Not That Different

When you stand back and look at SmallCo and BigCo together they are not all that different. Both were building homes into the bubble and both got caught short when it burst. The big difference is simply in the vastly different scale of the respective operations, not what the small and big companies were doing.

Lennar was the second largest national builder and, at the peak in 2006, closed sales on about 50,000 homes per year and in the downturn has managed skillfully to survive and navigate the treacherous waters of the economic storm (with some help from above), positioning itself to thrive as the residential market starts to recover.

SmallCo is a family operation running just of handful smaller projects at any one time. What is missing for SmallCo is the access to the same type of financial resources (once provided by community banks) and the governmental support afforded the larger company. Resources that might help SmallCo too to weather the storm and buy time in an extremely tough economic and impossible financing environment. 

Who will get to rebuild America?

Thursday, December 30, 2010

The Art and Science of Bank Closure

DECEMBER 28, 2010, 4:10 P.M. ET

WSJ: FDIC's Tricky Business: When To Shut An Ailing Bank


More than 300 U.S. banks and savings institutions failed in the past four years. But there are huge differences in how sick they were when regulators seized them.

About a dozen of the dead financial institutions had a tangible common equity ratio, a widely used measurement of a bank's cushion to absorb losses, of more than 8% when they failed, according to an analysis by Keefe, Bruyette & Woods Inc. That isn't much worse than the median ratio of 9% among the 50 companies in the investment bank's regional-bank stock index.

In contrast, a total of 50 failed banks had negative capital by the time regulators swooped in, meaning their capital was depleted by losses. Those shutdowns came as long as two years after government officials issued their first warning about financial inadequacies, analysts at the KBW Inc. (KBW) unit found.

Timur Braziler, an analyst at Keefe, Bruyette & Woods, says the differences are a sign that "bank regulators and state officials simply can't get to these banks fast enough," citing the 860 battered institutions on the Federal Deposit Insurance Corp.'s "problem list" as of Sept. 30. "There's just not enough manpower and coordination to catch all these failing institutions at once."

Killing a bank too soon could mean getting rid of a financial institution that might recover to make solid, profitable loans. Waiting until all of a bank's capital is gone deepens the losses suffered by the FDIC's deposit-insurance fund, putting additional strain on surviving banks that pay into the fund.

FDIC officials dispute any suggestion that the agency has been overwhelmed by the U.S. banking industry's crisis or inconsistent in how it handles failed financial institutions.

The FDIC's division of resolutions and receiverships, the mortuary for fatally stricken banks and thrifts, has 2,133 employees, up from 219 in 2007. That includes more than 50 veterans of the savings-and-loan crisis who came out of retirement to deal with a new crop of dead banks.

The decision about when to seize a battered bank is complicated by the hodgepodge of regulators that oversee the nation's 7,760 federally insured financial institutions. Some state officials aren't allowed by law to close a bank unless they can prove it has burned through all its capital. Federal officials have more leeway and can shut down a bank even if it isn't yet "critically undercapitalized," the lowest rung on the regulatory ladder.

"It is always difficult for regulators to decide when to close a bank," said Thomas Vartanian, a partner at law firm Dechert LLP and general counsel of the Federal Home Loan Bank Board during the Reagan administration. "Often, they are trying to strike a balance between giving failing banks every chance of survival by allowing them time to pursue potential suitors, and seizing them too late to minimize the cost to the FDIC."

James Wigand, a longtime FDIC official, said it is a "difficult judgment to make," although "for the most, part, history will judge that the regulators got it right" during the banking industry's latest crisis. On Dec. 31, Wigand will become director of a new FDIC unit overseeing systemically important financial firms. The post was created as a result of the Dodd-Frank financial-overhaul law.

Some of the banks classified by regulators as well-capitalized at the time of their failure were dragged down by a parent company that collapsed. Two of the nine banks owned by FBOP Corp., a bank-holding company in Oak Park, Ill., had a tangible common equity ratio of more than 10% when the bank-holding company was seized by regulators in October 2009. At other banks, losses ballooned shortly after regulators examined their financial statements and loan files, causing sudden death.

The Keefe, Bruyette & Woods analysis includes failures from February 2007 to July 2010. A total of 157 banks have been seized in 2010, up from 140 in 2009.

Imperial Savings & Loan Association, based in Martinsville, Va., failed in August, more than a year after losses left the tiny thrift with negative capital. The demise is expected to cost the FDIC's insurance fund $3.5 million.

William Cody Spencer founded Imperial in July 1929, using $300 of savings from fellow Baptist church members, running the minority-owned thrift from his home for 30 years. In 2008, the Office of Thrift Supervision, or OTS, issued a formal warning about Imperial's deteriorating financial condition.

Daniel Thibeault, co-founder of a student-loan business in Cambridge, Mass., said he made "six or seven submissions" to OTS in an effort to buy Imperial before it was seized, offering to pour in $6 million in capital immediately and an additional $6 million within 18 months.

"Short of popping the champagne, we were 98% close to getting this deal," he says, complaining he "never got a straight answer" from the OTS about why he was spurned.

In a statement, the OTS says the "potential acquirers were unable to demonstrate the viability of their proposals by showing they possessed the expertise and the financial resources to operate a financial institution." The agency says it made "an extraordinary effort over several years by working aggressively with multiple groups of potential investors interested in acquiring Imperial."

Ronald Haley, president of River Community Bank, a unit of River Bancorp Inc., also of Martinsville, that bought Imperial after it failed, says "it was just too small to function in the banking world today."

-By Jean Eaglesham, The Wall Street Journal

Wednesday, December 29, 2010

FDIC Sells Four Loan Portfolios Totaling $1.22 Billion

By Mark Heschmeyer

December 27, 2010
In the first deal, the FDIC sold a 40% equity interest in a newly- formed limited liability company created to hold assets with an unpaid principal balance of approximately $204 million from 12 failed bank receiverships. 

The winning bidder of the FDIC Multibank CRE Venture Loan and REO Structured Transaction 2010-2, Northern Pool was ColFin Milestone North Funding LLC, a consortium of investors organized by Los Angeles-based Colony Capital. The purchase price was 27% of the unpaid principal balance. The Cogsville Group LLC of New York is minority-owned and partnered with Colony. 

As an equity participant, the FDIC will retain a 60% equity interest in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC purchase money notes of $28.5 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC. 

The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 557 distressed commercial real estate loans, of which more than 50% are non-performing. Collectively, the loans have an unpaid principal balance of approximately $204 million. About 82% of the collateral in the portfolio is in Michigan. As the LLC's manager, Colony will manage, service, and ultimately dispose of the LLC's assets. 

All of the loans were from banks that failed during the past 20 months. 

In a second deal, the FDIC closed on a sale of a 40% equity interest in a newly- formed limited liability company created to hold assets with an unpaid principal balance of approximately $137 million from five failed bank receiverships. 

The winning bidder of the FDIC Multibank CRE Venture Loan and REO Structured Transaction 2010-2, Western Pool is Colony Milestone Co-Investment Partners LP, a consortium of investors also organized by Colony Capital. The purchase price was 60.10% of the unpaid principal balance. The Cogsville Group again partnered with Colony. 

As an equity participant, the FDIC will retain a 60% stake in the LLC and share in the returns on the assets. 

The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC, as receiver, purchase money notes of $42.6 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC. 

The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 198 distressed commercial real estate loans, of which more than 38% are non-performing. Collectively, the loans have an unpaid principal balance of approximately $137 million. About 78% of the collateral in the portfolio is in Utah. Colony will manage, service, and ultimately dispose of the LLC's assets. 

In a third deal, the FDIC sold a 40% equity interest in a newly-formed limited liability company (LLC) created to hold assets with an unpaid principal balance of approximately $279 million from nine failed bank receiverships. The winning bidder of the Western Residential Acquisition and Development pool of the 2010-2 Multibank Structured Transaction was Cache Valley Bank in Logan, UT, with a purchase price of 22.22% of the unpaid principal balance. 

As an equity participant, the FDIC will retain a 60% stake in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing to the LLC, which will issue to the FDIC a purchase money note of $30.6 million. The sale was conducted on a competitive basis with the FDIC receiving bids for either a 40% ownership interest or a 20% ownership interest in the LLC. 

The FDIC as receiver for the failed banks will convey to the LLC a portfolio of approximately 761 distressed residential acquisition and development loans, of which more than 50% are delinquent. Collectively, the loans have an unpaid principal balance of approximately $279 million. About 81% of the collateral in the portfolio is in Utah, Arizona, California, and Nevada. Cache Valley will manage, service, and ultimately dispose of the LLC's assets. 

All of the loans were from banks that failed during the past 14 months. 

Lastly, RoundPoint Financial Group purchased a 40% stake of a $603 million mortgage loan portfolio from the FDIC in conjunction with RBS Financial Products Inc. 

The FDIC retains a 60% equity interest in what is a newly created venture that will acquire the pool of mortgages. RoundPoint Capital Group and RoundPoint Mortgage Servicing Corp. will oversee the management and servicing of all loans in the portfolio. 

Monday, December 27, 2010

Wall Street Journal Analysis: Small Banks Still Suffering

DECEMBER 26, 2010

Bailed-Out Banks Slip Toward Failure

Number of Shaky Lenders Rises to 98 as Bad Loans Pile Up; Smaller Institutions Hit Hardest

By MICHAEL RAPOPORT, Wall Street Journal

Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.

The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators. The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program.

When TARP was created in the heat of the financial crisis, government officials said it would help only healthy banks. The depth of today's problems for some of the institutions, however, suggests that a number of them were in parlous shape from the beginning.

Seven TARP recipients have already failed, resulting in more than $2.7 billion in lost TARP funds. Most of the troubled TARP recipients are small, plagued by wayward lending programs from which they might not recover. The median size of the 98 banks was $439 million in assets as of Sept. 30. The median TARP infusion for each was $10 million, federal filings show.

"We certainly understand and recognize that some of the smaller institutions are experiencing stress," said David Miller, chief investment officer at the Treasury Department's Office of Financial Stability, which runs TARP. He noted that Congress mandated that banks of all sizes be eligible for TARP, adding that the government's TARP investment as a whole is performing well.

Chris Cole, senior regulatory counsel at the Independent Community Bankers of America, a trade group, said small banks are "turning around slowly." Smaller TARP recipients are in worse shape than larger banks because the larger ones got help in addition to TARP, Mr. Cole said. Bank of America Corp. and Citigroup Inc. tapped the Federal Reserve's emergency-liquidity programs frequently during the crisis.

The troubled banks identified by the Journal all have either a Tier 1 capital ratio under the "well-capitalized" 6% level; both a total risk-based capital ratio of under the "well-capitalized" 10% threshold and nonperforming loans of over 10% of their portfolio; or a regulatory order requiring the bank to monitor or boost its capital.

A Federal Deposit Insurance Corp. spokesman declined to comment on the Journal's analysis, which also calculated that 814 of the nation's 7,760 banks and savings institutions are troubled according to these standards, up from 729 at the end of the second quarter. The FDIC's official list of problem banks, which uses different criteria from the Journal's analysis, includes 860 financial institutions. The banks aren't publicly identified.

In a response to the GAO report, the Treasury Department said it would consider the GAO's recommendations to improve its funding process if it ever has a program similar to TARP again.In October, the Government Accountability Office said 78 banks on the FDIC's troubled-bank list as of June 30 were TARP recipients, up from 47 at the end of 2009. Dozens of TARP banks were "marginal institutions" that were financially weaker than other recipients and should have gotten more scrutiny before receiving taxpayer-funded infusions, the GAO said.

In comparison, the first eight banks and securities firms receiving TARP got a total of $125 billion. All have repaid the funds Arthur Wilmarth, a George Washington University law professor and expert on banking regulation, said a lot of smaller TARP recipients are burdened with risky commercial-real-estate loans tied up in troubled strip malls and the like, and that makes it hard for them to raise new capital. "A lot of them are in kind of a frozen position," he said.

One example of a TARP recipient in deep trouble: closely held Legacy Bank of Milwaukee. The bank had $205 million in assets as of Sept. 30 and got $5.5 million in TARP funds in January 2009. But more than half of Legacy's loans were in commercial real estate, and its nonperforming loans have escalated to 23% of its portfolio. It has posted eight straight quarterly losses, for a total loss of $11.6 million.

Last month, the Federal Reserve declared Legacy "significantly undercapitalized," giving the bank until mid-January to either sell itself or raise more capital.

José Mantilla, Legacy's president and chief executive, said the bank lends to an underserved, lower-income customer base. During the recession, those customers "have suffered, and they have fallen behind," Mr. Mantilla said.

Legacy is working to raise capital, and "we still feel optimistic" about the bank's chances, he said.

CommunityOne Bank of Asheboro, N.C., got $51.5 million in TARP funds in February 2009 through parent FNB United Corp. The company has suffered nine straight quarterly losses, sapping its capital. In July, the Office of the Comptroller of the Currency said the bank had engaged in "unsafe or unsound banking practices."

R. Larry Campbell, the bank's interim president and chief executive, said CommunityOne is "fully engaged" in efforts to boost its capital.

Write to Michael Rapoport at

Banks That Went Bust

Track U.S. bank failures since January 2008.

Sunday, December 26, 2010

Assessing the Loss of Community Banks

On bank failures, 'Don’t Ask, Don’t Tell' still rules

The year just about to end hasn’t been a great one for US banks. The Federal Deposit Insurance Corporation (FDIC) has had to participate in the closure of 157 banks in 2010, out of the roughly 7,800 banks and savings associations with deposits insured through the FDIC.
Few of the bank failures in 2010 have been front-page news, outside their immediate communities. If a New York- or Los Angeles-based bank were to fail, that would be one thing – the implications for economic confidence in general are clear.
But bank failures in places like Lino Lakes, MN, or McCaysville, GA or Batesville, AR (which all saw small local banks close last Friday) just don’t get much attention or analysis.
It’s as if the MSM has collectively decided not to ask many questions about why, two years into the Great Recession, small banks continue to fail.
And as for whether Washington, or the state governments, could be doing more to help these banks keep their doors open long enough to repair their balance sheets – no one seems to be able to tell.
On community bank failures, beyond reassuring nervous customers that the FDIC will protect their bank deposits, “Don’t Ask, Don’t Tell” seems to suit the MSM just fine.
One of the best ways that the MSM could improve its coverage of bank failures would be to focus more on how failures affect local entrepreneurs who had borrowed money from failed banks. The FDIC even has a handy pamphlet that touches on some of the relevant issues.
Looking at bank failures from the perspective of borrowers, particularly entrepreneurs, raises important questions that reporters could explore, such as:
How many entrepreneurs who have borrowed money from a failed bank find it hard to identify a suitable replacement lender? That is - how many are tagged (fairly or unfairly) as shady customers of the failed bank, and shunned when they go out to seek new loans?
And how many of these entrepreneurs are forced to sell assets in order to raise capital as a result, because they cannot find a replacement lender? What does this mean for efforts to spark a US economic recovery?
Finally – to end on a positive note, since it’s almost Christmas – how often does a bank failure benefit local entrepreneurs?
For example, if a local community bank is badly run, and it is taken over by a healthier bank as part of an FDIC-assisted process, how often does the new bank’s entry into the market result in local entrepreneurs finding it easier to get loans?
With the MSM’s “Don’t Ask, Don’t Tell” position on bank failures, readers and viewers are not getting the whole story.
This needs to change.

Read more at the Washington Examiner:

Thursday, December 23, 2010

A Not So Wonderful Life for Community Banks

December 22, 2010

So Long, Bailey Building & Loan

By ROB COX, New York Times

This is the time of year when families gather to watch Jimmy Stewart play George Bailey, the small-town banker who learns the value of extending credit to his neighbors with a little angelic intervention in “It’s a Wonderful Life.” Though Mr. Bailey remains emblematic of a benign banking system, most Americans probably don’t realize he’s the most endangered species in finance.

Hundreds of community banks, a fixture of small-town America, have failed or sold out to bigger rivals in the last year. But many more of the country’s 7,650 smaller banks will disappear in the next few years — a consequence, unintended or otherwise, of government and regulatory decisions codifying the biggest banks as infallible.

As sad as that may sound, it may not be such a disaster for regulators, shareholders and, perhaps surprisingly, consumers. That’s not to say the extinction of a species is to be blithely welcomed. Policy makers should certainly be asking whether there is a net negative consequence to rules and regulations that hasten the demise of the small, independent financial institution.

In some respects the spike in disappearing banks — up to 300 this year — simply represents a return to a long-term shift toward ever larger institutions that had slowed in the boom years of the last decade. At the beginning of the 1990s, the Federal Deposit Insurance Corporation oversaw 16,074 institutions. Within a decade that number had fallen to 10,222, an average net loss of 585 banks a year.

Over the next 10 years, however, the decline slowed. At the end of 2007, the number of institutions overseen by the F.D.I.C was shrinking at an average of 240 annually, mostly a result of mergers and acquisitions. The rate accelerated from 2008, thanks largely to failures — 157 this year compared with three in 2007.

The beneficiaries of this trend have been the biggest banks. At the start of the 1990s there were 59 institutions with more than $10 billion in assets holding 31.8 percent of the nation’s stock of banking assets. Today, their ranks have nearly doubled to 109, while their share of assets has marched upward to 78.6 percent.

It won’t stop there. For one, the F.D.I.C.’s troubled bank list covers 860 institutions — including many of the 600 or so that have yet to pay back bailout funds. While not all of them will be seized, many will wind up in the arms of larger, better-capitalized rivals.

Even healthy community banks are in for leaner times.

One of the reasons fewer banks vanished in the years leading up to the financial crisis was their reliance on commercial and residential property loans, which worked fine when prices were rising. But now they are being hit with big write-downs on those loans — and can’t see where they can profitably deploy future funds.

At the same time, their costs are rising, and earnings are coming under increased regulation. Just last week the Independent Community Bankers of America protested the Federal Reserve’s plan to cap debit interchange fees to comply with the Dodd-Frank financial reform act, saying it would put small banks at a disadvantage and make “the concept of ‘free checking’ a thing of the past.”

Big banks are also dealing with more red tape, but their size, diversity of businesses and loan portfolios gives them economies of scale to absorb such expenses without doing away with free checking to new depositors. From a policy perspective, it is arguably a terrible turn of events that megabanks bailed out during the crisis are now luring customers away from the George Baileys of the world.

But look at it another way: having a few, heavily regulated banks might actually be safer. Canada is dominated by five giant institutions. But because they were regulated like utilities, the country’s financial system averted the need for big bailouts. It’s also more profitable for shareholders. According to the F.D.I.C.’s third-quarter industry survey, big banks have better efficiency ratios and generate higher returns on assets and equity.

Finally, consumers might benefit from a smaller universe of stronger banks competing for their affections. At the least, there might be more credit available to them. In the second quarter, for every dollar of deposits customers stowed in the vaults of big banks, 86 cents was extended to borrowers, according to SNL Financial. Smaller banks lent out just 79 cents for every dollar of deposits.

George Bailey may have been a nice banker. But he just might have been more effective working as a senior loan officer for Bank of America’s Bedford Falls branch.


Wednesday, December 22, 2010

Big Banks Push Off Basel Capital Requirements

Bloomberg News

Banks Best Basel as Regulators Dilute or Delay Capital Rules

Dec. 22 (Bloomberg) -- More than 500 representatives from 27 nations, including top regulators and central bankers, met dozens of times this year to hammer out 440 pages of new rules to govern the world’s banks.

What’s not in the documents published by the Basel Committee on Banking Supervision, and the escape hatches that are, may have more impact on how financial institutions will operate following a global credit crisis that led to $1.8 trillion in bank losses and writedowns.

The committee’s most significant achievement, members say, an agreement to increase the amount of capital banks need to hold, won’t go into full effect for eight years. Other measures that regulators had hoped would prevent future crises -- liquidity standards, a capital surcharge on the biggest lenders and a global resolution mechanism for failing firms -- were postponed, allowing banks to escape the toughest rules that would force them to change the way they do business.

“There will be changes, but not fundamental changes to the banking model,” said Sheila Bair, who as chairman of the U.S. Federal Deposit Insurance Corp. sits on the Basel committee’s top decision-making body. “Hopefully there’ll be some pressure for banks to get smaller and simpler.”

Bair, 56, is one of five U.S. representatives on the board. She has assailed bankers for exaggerating the impact of planned regulations in an effort to scare the public and politicians. In an interview in June, she questioned “whether regulators can place any reliance on industry analysis of the impact of proposals to strengthen capital rules.”

Bank Lobbying

Banks carried out a yearlong campaign to blunt international regulations, arguing that efforts to rein them in would curb lending and impede economic recovery. The lobbying effort was led by the Institute of International Finance, which represents more than 400 financial firms around the world and is chaired by Josef Ackermann, Deutsche Bank AG’s chief executive officer. Ackermann and other IIF members wrote hundreds of letters to the Basel committee, met with regulators and addressed forums from Seoul to Washington.

In June, the group published a report estimating that the proposed capital rules would result in 9.7 million fewer jobs being created and erase 3.1 percent of global economic growth -- estimates the Basel committee later challenged.

“There is no question that increased costs to banks of core capital and funding will have to be largely passed along, which inevitably will take a macroeconomic toll,” Ackermann, 62, said when he presented the report.

Battle Lines

Banks also reached out to their home regulators, arguing that some rules would disadvantage them more than other nations’ lenders. That helped draw the battle lines inside the Basel committee, according to an account pieced together from interviews with half a dozen members who asked not to be identified because the deliberations aren’t public. Germany, France and Japan led the push for softening rules proposed last December and stretching out their implementation. The U.S., U.K. and Switzerland opposed changes or delays.

The committee agreed in July to narrow the definition of what counts as bank capital, focusing on common equity, which includes money received for selling shares and retained earnings. During the crisis, other forms of capital permitted under current rules, such as future benefits from servicing mortgages and tax deferrals, failed to provide a buffer against losses. Those are mostly disallowed under Basel III, as the rules published last week are known.

Canada Switch

The capital requirements might have been stricter had it not been for Greece. Escalating concern that the country wouldn’t be able to service its debt, culminating in a May bailout by the European Union and a $1 trillion rescue package for other member states that may need it, darkened prospects for economic recovery. That led some committee members to bend to bank pressure, according to policy makers, central bankers and others involved in the process.

By September, when the committee met to set the actual capital ratios, the U.S. was pushing to require that banks have common equity equal to 8 percent of their risk-weighted assets, members said. It ended up at 7 percent, after Canada switched sides at the meeting, tipping the balance toward the German camp. Canada’s banks pressed their regulators to lower the ratio because they said they would be punished unfairly as healthy lenders that survived the crisis unscathed, the members said.

Even after being weakened, the new ratios and definitions would require banks to hold about $800 billion more capital, the committee said last week. Most lenders will be able to raise the money by retaining profits before the rules go into effect.

Leverage Ratio

In addition to pushing for a higher capital ratio, Bair also argued for a global leverage ratio that would cap banks’ borrowing -- something the U.S. has had on its books since the 1980s. In July, when the committee was debating how to define capital, the U.S. agreed to some easing in exchange for Germany and France accepting a leverage ratio, some members said.

Proponents of the leverage ratio, or equity as a percentage of liabilities, say it’s a more straightforward way to prevent lenders from becoming too indebted. Unlike capital ratios, which are based on risk-weighting and can be manipulated, the leverage ratio counts all assets regardless of their risk.

The more bankers borrow the more they can maximize profit per share, a yardstick for determining compensation. The more they borrow the higher the risk that a small decline in asset prices can wipe out equity and make the bank insolvent.

No Correlation

The Basel committee adopted a 3 percent leverage rule in July, meaning that for every $3 of capital, a bank can borrow no more than $97. While the percentage is tentative and subject to review before it goes into effect, it has since come under attack by banks in Europe and Asia, which say it will restrict their borrowing capacity and inhibit lending.

The EU may exclude the leverage ratio when it converts Basel rules into law next year. Several member nations have advocated dropping the rule, people close to the discussions said last month. A majority of the 27 EU countries oppose adopting the ratio, these people said.

“The argument is that this will restrain lending -- I hope our colleagues in Europe don’t buy into this,” Bair said in an interview earlier this month.

Recent academic research supports Bair. A July paper by Jeremy Stein, a professor of economics at Harvard University, and two colleagues looked at data going back to the 1920s and found no correlation between higher capital ratios and costlier lending by banks. An October paper by Anat Admati and three other professors at Stanford University concluded that increased equity levels don’t restrict lending.

‘Continuing Bickering’

“In the long run, higher capital has small impact on lending,” said Stein in an interview. “But banks don’t like to go out and get it. And regulators bought the banks’ arguments on this. They could have been tougher.”

Bair, who first advocated the idea of an international leverage ratio in a speech to committee members in Merida, Mexico, in 2006, said she still expects global adoption.

Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based company that advises on financial regulation, said the leverage ratio may not make it in the end.

“Beyond tightening the definition of capital, nothing can be really counted as having been achieved,” Matthews, a former bank lobbyist, said of the Basel committee’s work this year. “There’s continuing bickering over liquidity and leverage regimes. They’re still studying too-big-to-fail issues, and it might be too late to finalize them as events take them over.”

$6 Trillion

The Basel committee, established in 1974, proposed its first liquidity standard, which would require banks to hold enough cash or easily cashable assets to meet their liabilities for up to a year. Running out of cash was behind the 2008 collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the U.S. and Northern Rock Plc in the U.K.

After banks showed they’d have to raise as much as $6 trillion in new long-term debt to be in compliance, the committee delayed a final decision on the rule, setting up an “observation period” of four to six years. It will likely be revised, according to members.

“Liquidity is very important and still an outstanding issue,” said Douglas Elliott, an economics fellow at the Washington-based Brookings Institution and a former JPMorgan Chase & Co. banker. “They’re trying to do it in the next couple of years, but it could take many more years. Or it might never get done if it proves too contentious.”

Resolution Mechanism

Lehman’s collapse also showed the need for a cross-border mechanism to wind down failing banks that have a global reach. More than 80 proceedings against the firm, involving hundreds of subsidiaries worldwide, have complicated recovery by creditors and destroyed much of the value of its assets.

The Financial Stability Board, which includes most Basel committee members as well as finance ministers from the Group of 20 nations, struggled to come up with such a resolution mechanism this year. The FSB postponed a decision until next year after divisions among nations proved too wide to bridge, members said. The group has been unable to agree on how to distribute losses among countries when a global bank fails and how different legal jurisdictions can recognize a single authority to pay creditors, the members said.

Too Big to Fail

The FSB is also responsible for determining which banks are systemically important and whether to impose additional capital requirements on them. The group may propose setting up national resolution authorities, rather than an international body, members said. Instead of a global accord on a surcharge for the largest banks, it may suggest a menu of options.

“Nobody’s been able to fix too-big-to-fail around the world because nobody knows how to do it,” said Hal Scott, a Harvard Law School professor who also is director of the Committee on Capital Markets Regulation, a nonpartisan group of academics and business executives. “Even figuring out how to resolve giant banks nationally is tough. How can you do it internationally? That was the biggest lesson of the crisis, systemic risk, but that’s still unresolved.”

Many issues may never be resolved, said Frederick Cannon, co-director of research at Keefe, Bruyette & Woods Inc. in New York, a firm that specializes in financial companies. G-20 leaders meeting in Seoul last month sounded as if they were claiming victory for regulatory reforms, even if they weren’t completed, Cannon said.

“Before Seoul, I was expecting more reforms to be concluded next year,” he said. “But now, more and more, I believe this is what we’re getting, nothing more. They got a 7 percent common equity requirement -- the rest is all uncertain to ever happen.”

‘Glass Half Full’

Charles Goodhart, a former Bank of England policy maker and professor at the London School of Economics, said he is more optimistic that differences will be resolved in coming years.

“There is still lots to be done, but we haven’t lost the momentum,” Goodhart said. “We’re 50 percent of the way there. We need to see it as the glass half full.”

Bair, who is stepping down from her FDIC position when her term expires in June, said she hopes the reforms will continue after she leaves the Basel committee. One remaining challenge, she said, is the reliance on banks’ internal models for measuring risk.

While smaller banks use standard risk-weightings prescribed by Basel, the largest banks use their own formulas to determine how much risk to assign their assets in calculating capital ratios. That leads to wide variations in how risk-weighted assets are tallied, Bair said.

“We have to get beyond too much reliance on banks’ internal models, their own views on risk,” she said.

To contact the reporter on this story: Yalman Onaran in New York at .

To contact the editor responsible for this story: David Scheer in New York at .

Tuesday, December 21, 2010

Wells Fargo reaches agreement with California to modify risky mortgages

The bank will make modifications valued at as much as $2.4 billion on 'pick-a-payment' mortgages. It also will pay $32 million to 12,000 borrowers who had such loans and lost their homes to foreclosure.

By Alejandro Lazo, Los Angeles Times

December 21, 2010

Wells Fargo & Co. reached an agreement with the state of California to make mortgage modifications valued at as much as $2.4 billion on risky mortgages that let borrowers decide how much they would pay each month.

The bank also will pay $32 million to more than 12,000 California borrowers who had such loans and lost their homes to foreclosure, according to the accord, announced Monday with Atty. Gen. Jerry Brown's office. The $32 million works out to an average of about $2,650 for each former homeowner.

Some of the promised modifications, to be made over the next three years, are expected to include reductions in the balances owed by borrowers. But that does not appear to be a significant concession by Wells Fargo because it already has modified more than 50,000 so-called pick-a-payment mortgages in California, reducing the balances on those loans by a total of $2.9 billion.

The San Francisco bank inherited the loans, known generically as pay-option adjustable-rate mortgages or option ARMs, when it purchased troubled Wachovia at the end of 2008 during the financial crisis. At that time Wells Fargo wrote down the value of the Wachovia portfolio before taking it onto its own books.

As a result, the loan modifications haven't generated painful losses for Wells Fargo. The company indicated Monday that it didn't expect the newly promised modifications to force it to further write down the portfolio.

"What they are doing now is more public relations," Rochdale Securities analyst Richard Bove said. "If the only economic impact is that they are going to give roughly $2,600 to $2,700 to a few thousand people, and if that is going to cost them on the order of $32 million, that's peanuts."

Pick-a-payment loans proved to be problematic for many borrowers, particularly in California, where many of the loans were made. Losses on the loans were a major reason Wachovia was forced to find a healthier bank to buy it.

The option ARMs allowed homeowners to essentially choose how much they wanted to pay on their loans each month. Many borrowers opted for the smallest payment, which didn't even cover the interest accruing each month. That meant the balance on the loan rose instead of fell. But once the balance reached a certain level, the required payment was reset automatically, often ballooning to a level that the borrower couldn't afford.

The settlement with California follows similar agreements that Wells Fargo struck in October with nine other states: Arizona, Colorado, Kansas, Florida, Illinois, Nevada, New Jersey, Texas and Washington.

The agreement is unrelated to an investigation that all 50 state attorneys general are conducting into the foreclosure practices of major lenders. That probe was sparked by revelations that several major lenders had employed people who had legally attested to the accuracy of foreclosure documents without reading them.

The bank also will pay the attorney general's office $1.8 million "for the investigation and prosecution of consumer protection matters, for consumer education and outreach, and to pay any costs incurred to distribute payments to eligible foreclosed borrowers."

FDIC Cuts Budget

FDIC Cuts Budget

Philip van Doorn

WASHINGTON (TheStreet) -- The Federal Deposit Insurance Corp. on Wednesday announced that it board of directors had approved a $4 billion operating budget for 2011, which was down slightly from the 2010 budget.

FDIC Chairman Sheila Bair said in a statement that the agency's staff had "met the challenge to find savings to offset a portion of the additional resources needed to carry out our new responsibilities under the Dodd-Frank Act," adding that "the FDIC's operating budget does not in any way involve the use of taxpayer funds," since the budget is fully funded by deposit insurance premiums paid by banks and thrifts.

The agency's board authorized a staffing level of 9,252 employees for 2011, increasing about 2.5% from 2010.
The decrease in the FDIC's budget comes at a very busy time for the agency, as it develops new regulations to implement the Dodd-Frank Act, and also faces continued findings by its Inspector General's Office that the agency could have taken earlier and stronger actions over the years leading up to some bank failures.

For example, in the Material Loss Review for Westernbank Puerto Rico, which failed on April 30, with most of its assets purchased from the FDIC by Banco Popular de Puerto Rico, which is the main subsidiary of Popular (BPOP).

The Inspector General said that "In hindsight, initiating an informal supervisory action in response to the 2006 examination and imposing a stronger supervisory action in response o the 2007 examination findings may have been prudent."

While hindsight is always 20-20, Westernbank's failure cost the deposit insurance fund an estimated $3.31 billion.

Monday, December 20, 2010

Colony Closes Structured Deal

$341M In Unpaid Loans Sold By FDIC

Collections & Credit Risk | Monday, December 20, 2010
The Cogsville Group LLC, a private equity firm, and Colony Capital LLC purchased from the Federal Deposit Insurance Corporation (FDIC) two portfolios of more than 700 commercial real estate loans. The two portfolios have an aggregate unpaid principal balance of approximately $341 million.

The FDIC had acquired the loans as the receiver of 14 failed financial institutions.

The transactions, which include both performing and non-performing loans, are the second and third purchases by Cogsville and Colony under a public-private partnership.

In the deal announced Monday, a portfolio with loan concentrations in western states, was purchased at 60% of the unpaid principal balance. A portfolio with loan largely based in northern states, was purchased at 27%.

Colony and Cogsville partnered with entities affiliated with WL Ross & Co. LLC and Invesco Ltd. and Mount Kellett Capital to acquire the portfolios. Milestone Advisors, LLC was hired as financial advisor to the FDIC on the sale of these assets.

Donald P. Cogsville, CEO at The Cogsville Group, says in 2010 his company and Colony acquired more than 2,300 commercial real estate loans with balances exceeding $2 billion.

"I believe this [transaction] is a unique opportunity to purchase distressed real estate assets of commercial banks holding more than $250 billion of non-performing loans, and of special servicers holding another $70 billion," he says. "We expect these numbers to grow over the next two years as more of the $1 trillion of commercial real estate loans originated since 2005 come due in a market that has seen prices fall more than 40%."

Merger Pressure

Regional US banks looking to mergers

By Francesco Guerrera, Justin Baer and Helen Thomas in New York
Published: December 19 2010 19:48 | Last updated: December 19 2010 19:48

Financial Times

US regional banks are preparing for consolidation as the hangover from the financial crisis and the sluggish economic recovery put pressure on underperforming lenders to raise capital or sell to a rival.
Bankers and their advisers say the next two years could witness several mergers among the 7,000-plus banks that make up the backbone of the US banking system.

On Friday, Marshall & Ilsey, a troubled mid-western lender, agreed to a $4.1bn all-stock takeover by Bank of Montreal, a Canadian bank that avoided large losses during the crisis.

Analysts say that this type of deal between struggling local lenders and healthier, bigger competitors could be a template for future takeovers.

“We expect a wave of . . . bank consolidation to emerge within the next 12-18 months after a dearth of deals during and immediately after the financial crisis,” wrote Christopher McGratty, at Keefe, Bruyette & Woods, in a note to clients.

With the “big three” national banks - JPMorgan Chase, Bank of America and Wells Fargo - still digesting the large acquisitions made during the turmoil, buyers are likely to be large regional players with solid balance sheets and robust earnings.

KBW analysts said banks such as Pittsburgh-based PNC, US Bancorp, the fifth-largest commercial bank in the US, and BB&T, a North Carolina lender, were among the companies that could hit the takeover trail to boost profits.

Canadian banks such as BMO and TD Bank Financial Group could also be among the ­acquirers.

Bankers said potential targets included banks whose recovery from the crisis has been slow because of their exposure to soured mortgages and commercial real estate loans.

Among the possible sellers, industry experts named Regions Financial Corporation, a loss-making lender with more than $130bn in assets and about 1,800 branches in the south and midwest of the US; Synovus, a smaller bank with exposure to the troubled real estate markets of Georgia and Florida; and Atlanta-based SunTrust.

SunTrust and Regions are among the largest remaining recipients of government aid, with $4.9bn and $3.5bn outstanding under the Troubled Asset Relief Programme. The two are part of a group of banks undergoing “stress tests” by the Federal Reserve to determine whether they are healthy enough to repay Tarp.

Regions, SunTrust and Synovus declined to comment.

US banks have often been a fertile source of deals. Despite a raft of takeovers that helped create today’s financial powerhouses such as BofA, JPMorgan and Citigroup, the industry remains fragmented.

Bank deals slowed to a crawl in 2008 as the crisis set in, with government-assisted takeovers of failing lenders the only source of activity. But as the worst of the downturn receded, many banks rebuilt their balance sheets and churned out higher profits. Their recovery has stood in stark relief to some banks still reeling from loan losses and tepid fee income.

Financial Times

Sunday, December 19, 2010

2010 Tally 157

Bloomberg 12.18.10 
U.S. Bank Collapses Reach 157 This Year as Six More Lenders Are Shuttered
Regulators shuttered six banks holding a total of $1.23 billion in assets, including three in Georgia and one each in Arkansas, Minnesota and Florida, as real-estate losses drive this year´s bank failures to 157. Florida has lost 29 lenders this year while 21 banks in Georgia were seized, the Federal Deposit Insurance Corp. said today in statements on its website. Regulators have closed 322 banks since the start of 2008. Today´s six closures cost the FDIC´s deposit-insurance fund a total of $267.6 million. "We´re over the hump in terms of number of failures and the average size, and potentially in the cost of them," Bert Ely, a banking consultant in Alexandria, Virginia, said in an interview. The crisis is "far from over but we´re making headway." This week´s failures may be the final closures for 2010 because regulators seldom shut down banks on holiday weekends, Ely said. The next two Fridays are Christmas Eve, a market holiday in the U.S., and New Year´s Eve.

Regulatory Turf: FDIC Muscles In On Fed Territory

Philip van Doorn

12/15/10 - 04:12 PM EST

WASHINGTON (TheStreet) -- The Federal Deposit Insurance Corp. on Wednesday announced a director for the new Office of Complex Financial Institutions, the next step in giving the FDIC regulatory powers normally reserved for the Federal Reserve.

The FDIC announced that Jim Wigand would be appointed to the position effective December 31. Wigand is currently the FDIC's deputy director for Franchise and Asset Marketing in the Division of Resolutions and Receiverships, handling the disposition of failed banks since 1997.

The new office is responsible for the "continuous review and oversight of bank holding companies with more than $100 billion in assets as well as non-bank financial companies designated as systemically important by the new Financial Stability Oversight Council," as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

This means the FDIC will now have supervisory authority and will have a continuous presence at the nation's largest bank holding companies. That regulatory authority that has been the sole bailiwick of the Fed but now affected financial firms will have another set of regulatory relationships to manage.

The Office of Complex Financial Institutions will also be responsible - along with the Federal Reserve - for reviewing and approving resolution plans for large banks and non-bank financial institutions.

The Financial Stability Oversight Council is chaired by the Secretary of the Treasury, and the Comptroller of the Currency and chairs of the Federal Reserve, the Securities and Exchange Commission, Federal Housing Finance Agency, the National Credit Union Administration and the FDIC are among the members of the council.

There are over 50 U.S. bank holding companies, investment banks, insurance companies and specialty finance companies with over $100 billion in total assets. The largest include Fannie Mae and Freddie Mac, which were taken into government conservatorship in September 2008. Other large, systemically important companies with over a $1 trillion in assets apiece include Bank of America (BAC)Citigroup (C)JPMorgan Chase (JPM) and Wells Fargo (WFC).

FDIC Chairman Sheila Bair said she was pleased with Wigand's appointment, as his decades of experience in resolutions, asset sales, structured finance and financial institution regulation uniquely position him to lead the CFI at a critically important time."


Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.