Corus Bank: First To Fail Without Delinquencies?
As you have all read by now, Corus Bancshares went belly up on Friday adding yet another failed institution to the growing hall of shame. What makes Corus unique, however, is that they may have been the first failure with little to no delinquencies in their major loan portfolios.
Construction & Development loans made up 88% of their outsanding loan portfolios at the end of Q2 and according to the FDIC Reg data had $0 in 30+ days delinquent:
Wow, they must have done a bang up job collecting that $142 million that was delinquent just 4 quarters ago.
They also have impressive improvement on their Multi-Family Residential Re as well:
Remarkable performance, eh? On the surface Corus doesn't look too bad - they have done an "exceptional job" of getting their delinquencies down. The next step would be to look at Restructured Debt (a convenient and popular place to currently hide problems):
Once again, no issue since there are... wait for it... none. Yep, no Restructured Debt. So the next thing to look at is Loan Loss Allowance (this is what management is prepared for):
The detail: www.wlmlab.com/bkLUR.asp?inst=HC1200393&pg=lla
Clearly, management was expecting problems as they are running 7.02% of their entire loan base as set aside for Losses.
And finally, and the dead give away that their was an impending problem, is to look at their Non-Accrual rates on the two portfolios making up 96% of their loans. They are running a 71% on their Construction Loans:
They are running a 93% on their Multifamily Loans. These numbers are practically unheard of and should have been a dead giveaway to anyone working through the progression just laid out that they were about to kick the bucket.
Basically, they stopped being a bank - which lives on Interest Income - and became a work out shop focusing strictly on lower balances because they knew they had impending charge offs.
Just because there are no delinquencies now, doesn't mean that they are not having problems. You have to look at Restructured Loans, Loss Allowance and Non-Accrual rates in addition to delinquencies.