San Diego Housing Bubble News and Analysis

I don't know if Vineyard will make it to the end of the month. There's no way if its $600 million of uninsured deposits get yanked (as they should). Since they're barred from taking on brokered deposits, there won't be enough liquidity to cash these folks out.

Yes, Vineyard is near the top of the list.

Bush has been doing these on Friday nights...which is good...it prevents/slows down the run on the failing banks.

I was surprised that the FDIC did not close any banks last Friday, but do they close two to make up for it this week? Both Downey and Vineyard need permission from regulators to operate, so their days are numbered. When there are articles like this a FDIC takeover is getting very close http://www.marketwatch.com/news/story/vi...

This is an old thread that I thought of after Vineyard got seized last week. They made it a hell of a lot longer than I thought they would.

Anyhow, I'm hearing through the grapevine that FBOP Corp. isn't long for this world. It's a private bank holding company with 100% of the stock owned by a very nice guy, a once-disciplined banker. But he took on too much construction and development and... bought $1.2 billion of Fannie/Freddie trust preferred that went to zippo. And he levered up. The two killers of banking: concentration and leverage. They'll get you every time.

Anyhow, FBOP owns San Diego National, Cal National up in LA, and Pacific National in SF, among other banks in Texas, Arizona, and Illinois. I suspect that these will all fail in due course.

Also, locally, it looks like Imperial Capital is headed for the skids. Between Imperial Capital and San Diego National, that's two fairly large local institutions. For what it's worth.

Do the Bigs like Wells Fargo, Chase, Citi benefit from the less competition?Do the crappy bankers get blow out so we are left with better, more experienced people

Dave: Vineyard doesn't surprise me, they were in extremis for a long while. It's funny, I happened to drive by their branch off the 15 and the 91 in Corona on my way back from Ontario Airport on Wednesday.

Too bad about SDNB, though. Several of my construction clients back in my consulting days used to bank with them and they had an excellent construction lending and surety bonding support program. Solid mid-level local players like SDNB and Grossmont Bank (before they became CB&T) really helped "grow" San Diego and did so with solidly underwritten loans, smart, careful programs and long-term personal relationships. Soon, it'll be nothing but big nationals like Wells, BofA and Citi and totally impersonal, automated banking.

Regulators shut 6 Ga. banks, 1 in N.Y.

http://www.philly.com/inquirer/world_us/...

64 and counting ...

A little off topic. I rarely go into the bank anymore with ATM's and online access. Has come to my attention though that at the 2 institutions I do business with they have had huge turnover of personnel lately. There's not a single person at either place that was working there a year ago. Is this a common theme for everyone else out there? Perhaps I should have started a new topic, just wondering.

Allan - glad to hear you had good experiences with the old Grossmont Bank. Many of the people stayed on with CBT after the conversion. I joined just after the conversion after graduating from USD. I have to say, we've been able to keep the community bank feel with approval for most deals right upstairs from our office in UTC. Higher commitments go just up the road to our Carmel Valley headquarters.

As for turnover, it's been fairly low with us as far back as I can remember. We underwrote conservatively during the boom times thanks to solid credit admin guys, which has SAVED us during this downturn. You'll see a lot more turnover at places where the writing is on the wall.

Evol: Is Don Gruhl still around? I worked with him several years back and for several years during my time at Corroon/Willis. We were heavily involved in construction from the surety side and Don was aces to work with.

Most of our clients were Military/Federal contractors, like RQ, Sundt and Wiley, and having someone like Don who knew the market and the players and the business made things a lot easier.

I'm glad to hear so many of the original Grossmont crew stayed on after the CB&T purchase. I sit back and watch local bank after local bank disappear: Scripps Bank, Bank of Commerce, Southwest Community Bank, the list goes on and on and it's disheartening to watch so many community institutions with strong local ties just vanish.

Not to worry, Allan. There will always be community banks like SDNB and the others. The names just change. Assuming SDNB fails, some larger bank will acquire it (probably not BofA, Wells, etc. - they're too capital constrained) and the good community banking teams will leave to start their own banks. These guys will grow their banks for ten years, sell out, and the cycle will repeat. There will always be good small banks around. Although the industry is consolidating. Back in 1985 there were 16,000 banks and thrifts - most of them tiny and fairly inefficient. Almost 25 years later, we still have about 8,000 left. My guess is that we'll be down to 4,000 or so over the next 15 years and the decline in numbers will slow down. At some point the number of start-ups and acquired banks will roughly cancel each other out. And my guesstimate is that happens somewhere around 3,500 - 5,000 institutions.

A question for the bankers out there. I saw a stat yesterday that floored me. 25% of the banks that have been shut down are located in Georgia. Is there any reason for that (i.e. lax/non-existent oversight in GA)?

I bank with SDNB. They were one of the two lenders my wife and I considered when we shopping for a loan for our house about a month ago. We got a better deal from a one branch bank in Atlanta (friend of a friend of a friend kind of thing), so we went with them. One day after making the choice, the Chicago Tribune ran a story that JPMorgan had filed suit against FBOP for defaulting on a $246MM note. This made me feel better about my choice, to say the least. :-)

I still like banking with SDNB, though, but I may end up back at Inland Federal Credit Union. That place is ultra local: one branch, and about four employees. I think I got asked for ID once in five years.

Atlanta had a lot of banks that started up over the last 10 years. In an effort to grow into their capital quickly many start-ups go to the old faithfuls: construction lending and CD funding. And that, of course, kills you ultimately. Atlanta got very ugly very early. I doubt that Atlanta will look materially worse than SoCal, Arizona, Nevada or Chicago once the dust settles in a few years where foreclosures are concerned.

SDNB wouldn't have held onto your loan - it would have been sold to Fannie/Freddie or someone else in all likelihood. So, SDNB's performance - or lack thereof - wouldn't have had any effect on you.

In fact, the bank in Atlanta that underwrote your loan may not still own it. And if it does - and it made you some kind of "friend's deal" (which I doubt) - then it's probably a bad deal for them. That is, they probably under-priced the loan. Not that you should care.

Yes, but having the FDIC swoop in can't do good things to the escrow timeline--and the timeline was pretty inflexible in this case. SDNB almost never hangs on to residential loans, AFAIK, so I wasn't concerned with that.

The "friend" thing is how I wound up in contact with a little bank in Georgia. We didn't get a "deal" ... except that they were amazingly on top of things despite the geography and time difference. My agent had some unkind words for some of the services used in this deal (escrow guys overcharged and were kind of lame, appraiser goofed up, etc.), but he said the lender was "as good as it gets" service-wise. I agree, they were terrific. (Plug: "They" means David Turner at Westside Bank in Hiram, Georgia. He's done a couple of short sales in California and might welcome more biz from the Land of Tofu.)

The bank was actually just a broker for this loan, so they didn't fund anything directly.

It's kind of fun to think about the Good Olde Days of escrow. After taking possession yesterday, I promptly started ripping 1960s vintage paneling off the walls, demolishing a built-in TV cabinet, and generally persuading things with my FUBAR. I'm a littlle sore. It's like an episode of "This Old House" ... except for the fact that it's not a cool old Cape Cod, there's no possible historical or achitectural significance, it's a generic stucco box in 92020, and I have a very small budget. :-P

I know you probably don't care, but... your WestSide Bank in Hiram, Georgia looks a magnitude worse than SDNB. I'll be shocked if it survives. 48% of its loans are in construction, almost 10% of the loan portfolio is past due, they lost almost $5 million last year. Horrific deposit base. It's a total disaster. And things are getting worse. Again, I know you don't care, but I would expect to see this one seized in the not-too-distant future. Among the worst looking balance sheets I've ever seen. Which in a way is not surprising as they have no business doing ANYTHING whatsoever outside of Georgia, much less in California.

Allan - Last I heard (which was a while ago) he was at International City Bank in Kearny Mesa. However, a quick google search revealed he may now be at Point Loma Community Bank.

CBT's been a great place to work with lots of good people. Senior management has changed over recently (promotions within) and I'm really impressed with the credit culture and hands-on leadership. I feel proud to be part of the team.

And down goes SDNB along with all of the other FBOP subsidiaries. Welcome to US Bank!! Uggh.

Dave: Yeah, I saw an article yesterday about FDIC seizing assets at nine banks, the largest weekly number since the S&L Crisis, and that SDNB and CalNational were amongst them.

I did a lot of work with SDNB back in the day and its a shame to see them go under.

I get the sense that we're nowhere near finished with this, however, and Bair at FDIC is looking increasingly embattled as the weeks wear on.

My guesstimate is that we'll see two more years of extremely elevated failure figures before they decline to drips and drabs. Painful but necessary.

Do you see any opportunities for investors, with the right pedigree, to possibly purchase some of these local banks that are going under?

Reason for the question, I have had some discussions with friends, regarding buying a bank. I understand that the group has to include members who are experienced in banking and have the requisite certifications and background, in order to secure the charter.

FBOP won the race, but we knew both banks' days were numbered.

As a (former, as of today) SDNB customer, this is a non-event. I had been expecting it, after all--FBOP's problems have been well-documented over the past few months.

I wonder what's going to happen to the whale painting?

The problem is that you can't participate in the FDIC auction process for a failed bank unless you already have a charter. So, that restricts the auction process to relatively healthy banks and investor groups that have a "shelf charter" (that is, they don't have a bank yet, but they've got a charter to start one that avoids their having "de novo" status). Shelf charters are VERY hard to obtain, even more so now that the shit's hit the fan. In fact, I believe there are less than 10 shelf charters currently (in)active.

So, you could start a "de novo" bank (basically, a start-up bank), but there are two problems. One, the FDIC isn't allowing de novos to form right now, for all intents and purposes. Second, de novo banks that are less than seven years old can't participate in the FDIC auctions.

That's a long way of saying that it's virtually impossible to either start a bank right now or to purchase a bank from the FDIC unless you've already got a bank that's up and running.