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Safety and Soundness

February 7, 2011

To paraphrase a famous (or infamous) critic of capitalism, "there is a specter haunting" our banks. It is the specter of unrealized losses from properties that our banks have yet to put into foreclosure. For anyone operating without insider knowledge, it is a best guess-scenario to estimate just how many writedowns are yet to come.

The Wall Street Journal says that a 2009 change to accounting rules softened rules on writedowns for bad assets. The

April 27, 2010

Thursday will be a telling day to followers of Pacific Capital Bancorp.

April 21, 2010

Goldman Sachs has your local community bank in its sights. Since last fall, Goldman Sachs has quietly purchased parts of four banks.  Another acquisition is currently pending a review by the Federal Reserve.

Here is a list of those institutions:

The profile of these banks are all different, save for the fact that each has fallen into financial trouble. Goldman is striking when their prey is weak. Doral Bank, for instance, was a big player in sub-prime mortgage lending. First Marblehead has been one of the larger players in

September 4, 2009

It leaves open the possibility that the huge jump in insider lending at Pacific Capital might reflect a new extension of credit to just one executive.

Then again, that is not for certain and knowing more could be difficult to ascertain. Under 215.9 of Regulation O, executives are required to report loans that they receive from a bank to the board of directors.  However, the disclosure requirements end there.

Schedule RC-M, distributed by the Federal Financial Institutions Examination Council, does reveal some details.  It finds that the sum of extensions of credit to insiders (executive officers, directors, principal shareholders and related interests) jumped in the last three months of 2007.  On 9-30-07, PCBC reported approximately $7.7 million in such loans.  By the end of 2007, that sum had increased to $37.5 million.

RC-M does indicate the number of officers that have taken out loans of more than $500,000 with the bank.  That

September 3, 2009

Part of the beauty of blogging is its ability to generate constructive feedback. Some feedback yesterday led me to research the trail of insider lending at Pacific Capital.  I'm glad I did, because there's more smoke out there and it points to CEO George Leis.

When I wrote yesterday about the incidence of high levels of credit extensions to insiders at Pacific Capital, it provoked some good responses.  One of those responses was this:

"Have you researched 'when' these loans were made? I would venture to guess over a long period of time, and not in the last few quarters."

This is a very good question.  It takes the facts that I observed yesterday (lots of lending at a bank to its insiders), but by giving those decisions a time frame, it gives a better picture of the appropriateness of that decision-making.

Just for sake of definitions, insiders are considered to be "executive officers, directors, and prinicipal

July 2, 2009

Hah...that's some fancy legal ease.  The essence of what has been revealed about Beazer couldn't be more crystal clear.  Beazer agreed yesterday to a $53 million deferred-prosecution settlement with the Justice Department.  Beazer will return $5 million to the government and $48 million to a group of  its former customers.  The settlement says that Beazer's lending practices harmed the property values of previous buyers.

There were a lot of foreclosures in Beazer homes.  The company used easy loans to drive customers to its home. 

May 13, 2009

I really like Bancorp South (BXS). Granted, I have to like them from afar, because they don't have any branches in North Carolina.

May 11, 2009

In spite of the fact that there are numerous signs about the return of our economy, there are also plenty of signs that we are not out of the woods.

My last points suggested that some anecdotal events (home sales in my neighborhood, the new work enjoyed by my contractor) point to a recovery.

Then again, its hard to ignore the macro picture.

March 31, 2009

The SEC will hold a forum to examine policy responses to concern about the role of ratings agencies in recent economic events. The forum will be held on April 15th in Washington, DC.

March 6, 2009

The House of Representatives will hold a hearing on mark-to-market accounting, potentially as soon as next week, according to CNBC.